Author Archives: Aurora

The Biggest Money Omissions I See

By Kimberly Quinn, CFP®

As a financial advisor, I know how many concerns and considerations you have on your plate. There’s a lot to think about—from investment management to insurance needs to estate planning and beyond!

Over the years I’ve seen many of my clients make the same omissions again and again. To help educate other investors, I thought it’d be helpful to share these oversights. After reading about these common money issues I hope you’ll be less likely to make them yourself.

Let’s look at some of the biggest money pitfalls I see and how you can avoid them.

Not Understanding the Factors That Can Affect Your Outcome

Financial planning isn’t as simple as investing in the market and letting your portfolio grow. There are many factors to consider, some of which are in your control and some of which aren’t. Some common factors I see many investors overlook include:

Inflation

As an investor, you’re always fighting against inflation. While we can’t control inflation rates, we can control the choices you make with your investments to help beat inflation. According to the U.S. Department of Labor, the current annual rate of inflation is 8.5% for the previous 12 months, ending in March 2022.(1) This means that to beat inflation, your investments need to be earning more than 8.5%. Many investors forget to consider inflation, a critical oversight.

Sitting Out the Market

Many investors are nervous about entering the market, and I understand that hesitation. But I often see investors make the strategic mistake of waiting too long to invest or sitting out the market. I encourage my clients to start investing early and take the steps they can now to prepare themselves for the future. We don’t have a crystal ball and will never know where life will take us, so it’s better to be prepared for whatever the market might bring.

Investor Psychology

I urge my clients to consider their own psychology as an investor, one of the most consequential factors. We’re all different with different goals, risk tolerances, and financial needs; that being said, often my clients are their own worst enemies. For example, it might be tempting to sell some of your investments and bail when we see the market dip. But data shows that when you ride out the dip, you often come out ahead. According to the Securities and Exchange Commission (SEC), “over the long term the stock market has historically provided around 10% annual returns (closer to 6% or 7% ‘real’ returns when you subtract for the effects of inflation).” (2)

Emotional, rash decisions are often one of the biggest detriments to an investor’s performance.

Not Updating Your Financial Plan As Life Changes

Your financial plan shouldn’t just sit on a shelf and collect dust. It should be as dynamic as you are, changing with you as life changes. Whether you get married, go through a divorce, or welcome children or grandchildren into your life, these important life milestones impact your plan, from investment management to insurance planning to estate planning. Talk to your financial advisor, CPA, and attorneys if something in your life changes and you need to review and potentially update your plan.

Not Selecting the Right Insurance

You likely need different types of insurance (and different amounts of coverage) for each stage of life. I encourage my clients to think outside of just health insurance and consider comprehensive coverage. Your insurance needs might include:

  • Disability insurance
  • Life insurance
  • Umbrella coverage
  • Long-term care insurance
  • Medicare insurance

Proper risk management is key to staying afloat during uncertain times. This can be accomplished by considering unexpected risks like divorce, disability, accidents, and illness, and ensuring you’re properly covered. Is your life insurance through your employer? It’s important to know if your coverage is portable. If not you may no longer have coverage when you leave the employer.

Are You Making Some of These Financial Mistakes?

Don’t let these common financial mistakes derail your wealth management plan. If you’d like to discuss how to navigate your financial questions, call us at (617) 610-0587 or email us at info@cim.financial.

(1) https://www.bls.gov/news.release/pdf/cpi.pdf
(2) https://www.sec.gov/investor/pubs/sec-guide-to-savings-and-investing.pdf

About Kim

Kimberly Quinn is co-owner and CERTIFIED FINANCIAL PLANNER™ professional at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 30 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn, and be sure to register for her free divorce workshop that takes place on the second Saturday of every month.

What Should You Do About Inflation and Stock Market Volatility?

By Kim Segal, CFP®

After a three-year rally, the financial markets have been down for seven straight days, marking their worst slide since the pandemic decline in March of 20201. Monday’s market dip put the S&P 500 down over 10%, which is officially called a “correction” on Wall Street2.

In addition to the stock market decline, inflation has been causing concerns. Because inflation is reaching 40-year highs, it is expected that the Federal Reserve will begin raising interest rates in the spring, which could potentially slow the economy3.

Investors are understandably nervous about their investments and their purchasing power. If you are worried about your portfolio, you’re not alone. But during stock market volatility, it’s important to keep a level head to avoid financial mistakes.

Stay Calm

At times like these, it’s important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Declines in the Dow Jones Industrial Average are actually fairly regular events. In fact, drops of 10% or more happen about once a year on average4:

Ride Out the Uncertainty Storm

It’s important to remember that markets dislike uncertainty. Currently, there is a lot of uncertainty regarding the continued coronavirus pandemic, inflation, interest rate hikes, tensions between Russia and Ukraine, and earnings reports due out for several large technology companies. 

With so much uncertainty, volatility right now is extreme. The VIX, or the market volatility index, is at the highest level in nearly a year5. As we get more information, it is likely that day-to-day market fluctuations will decrease. 

Play Dead

There’s an old saying that the best thing to do when you meet a bear market is the same as if you were to meet a bear in the woods: play dead. While easier said than done, successful long-term investors know that it’s important to stay calm during a market correction. We don’t know yet whether the coronavirus fears will translate into an official correction, but the risk always exists.

Market volatility has increased in recent years and the media can often make it seem like each episode is worse than the one before. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses.

Remember That Your Portfolio Is Diversified

Fears about inflation, volatility, and market declines are stressful. However, it is important to keep in mind that while the stock market is down, your portfolio is made up of both stocks, bonds, and other assets that are designed to work together to decrease overall losses. It’s important to consider your specific portfolio, investment horizon, and circumstances when reflecting on economic events. If you have questions about your portfolio, get in touch with our office.

Review Your 401(k) and Other Accounts

Now is a good time to take a look at all of your investment accounts, including your 401(k) to make sure it is well diversified. If you have not rebalanced your other investment accounts in the last year, get in touch with our office and we’ll take a look and offer recommendations to minimize potential losses.

Speak With Your Advisor

Whether you’re new to investing or an experienced investor, it’s helpful to consult with an objective third party. Human nature causes us all to act out of emotion when our accounts go down. As an independent firm, we put your best interests first. We seek to serve as a support system for our clients, helping them make informed financial decisions that aren’t driven solely by emotion. 

We’re Here for Your Friends and Family

If you have friends or family who need help with their investments, we are happy to offer a complimentary portfolio review and recommendations. We can discuss what is appropriate for their immediate needs and long-term objectives. Sometimes simply speaking with a financial advisor may help investors feel more confident and less concerned with the day-to-day market activity.

You can schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

About Kim

Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ professional at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.

1https://www.cnbc.com/2022/01/23/stock-market-futures-open-to-close-news.html
2https://www.forbes.com/advisor/investing/what-is-market-correction/
3https://abcnews.go.com/Business/wireStory/fed-signal-rate-hike-launches-risky-inflation-fight-82442509
4https://www.capitalgroup.com/individual/planning/market-fluctuations/past-market-declines.html
5https://seekingalpha.com/news/3790661-sp-500-etfs-fall-as-the-vix-crosses-above-32

What’s Going on With Inflation? 3 Reasons Why It’s Here to Stay

By Kim Segal, CFP®

It’s official. After months of being told the current inflation crisis is transitory, Federal Reserve Chair Jerome Powell announced that we can expect high inflation to continue into 20221. What may have seemed like a slight inconvenience at first is now becoming a much larger issue as people watch the value of their money degrade right before their eyes with no clear end in sight. 

The best way to assess the situation is to take a look at the factors surrounding why inflation is rising. The COVID-19 pandemic was unlike anything the world has ever seen. The entire global economy came to a complete standstill for the only time in modern history. It’s to be expected that the rebound from such a once-in-a-lifetime event will be just as enigmatic as the event itself. 

That’s not to say that the future is bleak, but rather to temper expectations so that we can properly plan for the future and mitigate potential risk. Here are some reasons why inflation has increased in the past year and what it means for your long-term purchasing power.

What Is Inflation?

According to Investopedia, inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy.2 It can be characterized as persistent or transitory. Transitory inflation3 is temporary and happens when supply doesn’t meet demand. If left unhandled, it can turn into persistent inflation,4 which results in a more permanent increase in prices due to a continuous mismatch in supply and demand. 

The Consumer Price Index (CPI) is a common measure of inflation. The most recent CPI report from November 2021 suggested that inflation has risen an astounding 6.8% over the past year!5 That is significantly higher than the typical 2% rise we see in an average year. And the Producer Price Index (PPI), which measures the average change over time in the selling prices received by domestic producers for their output, increased to .8% in November.

Why Is Inflation So High?

To better understand if inflation will last, let’s take a look at the factors contributing to its rise.

Devalued Dollar

When the COVID-19 pandemic first hit and millions of Americans were furloughed or laid off, drastic economic measures were taken to keep the country afloat. The U.S. government instituted expansionary monetary and fiscal policies in order to pump money back into the economy, increasing the money supply at a rapid rate. It jumped from $15.5 trillion in February 2020 to $18.8 trillion in October 2020, an increase of over $3 trillion.6

Though experts agree that these drastic measures were necessary to keep the economy from collapsing, they also agree that the increase in money supply devalued the dollar, meaning it takes more dollars to buy the same item since each dollar is less valuable. 

This issue is further compounded by the current trade deficit, which hit $80.9 billion in September (an 11.2% increase).7 Because the U.S. buys (imports) more than it sells (exports), a devalued dollar relative to other countries’ currencies drives the cost of imported goods up even more. It’s tempting to write these issues off as fallout from the pandemic, but the trade deficit is not a new issue. In fact, the U.S. has seen a deficit every year since 1975.8 This indicates that the rise of inflation is not a new issue either, it’s just been sped up and exacerbated by the increase in government spending in response to the pandemic. 

Supply Chain Headaches

If there’s one thing that’s been in the news even more than inflation concerns, it’s supply chain disruptions. Since the vaccine rollouts and slow return to pre-pandemic life, companies have struggled to keep up with manufacturing and distributing goods. This is because many distribution centers cut their hours when the global economy came to a halt in anticipation of a huge drop in demand for consumer goods. The drop in demand, however, did not come. 

As people across the globe spent days, then weeks, then months in their houses, demand skyrocketed for exercise equipment, home goods, and office supplies. Factories increased their output, but the distribution chains have struggled to get everything where they need to be. 

Additionally, the increased production has also caused a shortage in raw materials, thereby exacerbating the gap between overall supply and demand for even basic items. As demand continues to outpace supply, prices are driven higher and higher. 

Labor Shortages and Increasing Wages

Continued labor shortages are another factor driving inflation. In what is being called “The Great Resignation,” millions of workers across America have quit or considered quitting their jobs as they reevaluate the role that work plays in their lives.9 As such, many companies are finding that they have to pay higher wages in order to attract and retain employees. These increased costs often get passed through to the customer in the form of increased prices for goods and services.

The flip side of the labor shortage issue is the passage of the $15 federal minimum wage.10 Many states are following suit with plans to increase their respective minimum wage thresholds. So even if companies weren’t paying more for labor because of the struggle to find workers, they would still be paying more due to increasing minimum wage. Again, these increased costs will be passed through to consumers, and it will be more than just a transitory change in prices since the minimum wage laws are permanent. 

How Long Will Inflation Last?

It’s tough to say exactly how long inflation will last, but based on these three variables, it could be a couple years before we return to the target rate of 2%. As our global economy shifts, trade alliances change, and we experience the ongoing effects of the COVID-19 pandemic, it seems to be an issue that will persist for the foreseeable future. 

Let Us Help You Protect Against Inflation

As we approach the new year, it’s understandable to be concerned about inflation. Many of us are not only worried about how inflation will impact our current finances, but also about how it will affect our long-term goals. That’s why it’s so crucial to be realistic about how long inflation could impact your financial plan.

At Catalyst Investment Management, we have the tools and expertise to guide you through a long-term inflationary environment. We will review your investment and retirement plans for proper diversification and risk tolerance levels, ensuring you are properly protected no matter how long this increased inflation lasts. Call us at (617) 610-0587 or email info@cim.financial to review your plan today.

 

About Kim

Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ professional at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.

1https://www.foxbusiness.com/politics/powell-fed-wrong-inflation-not-transitory

2https://www.investopedia.com/terms/i/inflation.asp

3https://finance.yahoo.com/news/inflation-transitory-persistent-210149448.html

4https://finance.yahoo.com/news/inflation-transitory-persistent-210149448.html

5https://www.ftportfolios.com/Commentary/EconomicResearch/2021/12/10/the-consumer-price-index-cpi-increased-0.8percent-in-november

6https://www.statista.com/statistics/1121054/monthly-m2-money-stock-usa/

7https://www.thebalance.com/u-s-trade-deficit-causes-effects-trade-partners-3306276

8https://www.thoughtco.com/history-of-the-us-balance-of-trade-1147456

9https://www.abc.net.au/news/2021-09-24/the-great-resignation-post-pandemic-work-life-balance/100478866

10https://www.dol.gov/newsroom/releases/whd/whd20210721

What You Need to Know to Get Started with Medicare

By Nick Shea, MBA

An oft-overlooked yet headache-inducing retirement transition task is planning for healthcare coverage and thus navigating the Medicare system. Medicare offers a variety of enrollment options, which gives you the flexibility to choose components of the plan that you need. Unfortunately, all those choices can also be confusing to understand. The enrollment process itself can also bewilder even the most prepared retirees, so in this article, I break down the basics of your Medicare plan to help you make decisions that are right for you.

The Coverage Option Puzzle

Medicare is divided into parts: Part A, Part B, Part C, and Part D (there are more options, but we’ll start with the basics). Each retiree or married retired couple must understand and evaluate the different Parts to determine the most relevant and appropriate options for their situation.

Original Medicare is a package that includes Part A and Part B, with the optional add-on of Part D. Part A covers hospital services. If you or your spouse paid Medicare payroll taxes during your working years for at least 10 years, Part A is free for you. If you didn’t, you can still get coverage by paying a monthly premium. Part B covers doctor visits and other outpatient services. Even if you or your spouse paid Medicare payroll taxes, Part B comes with a monthly premium. Part D is an optional add-on that includes drug coverage. Not to make things even more confusing, but Part D has a late enrollment penalty. Even if you don’t need prescription coverage when you are first eligible for Medicare, enroll in the plan to avoid extra long-term costs.(1)

To help with Medicare costs such as copayments, coinsurance, and deductibles, many retirees will purchase Medigap insurance from private insurance companies to supplement their Original Medicare plan. Some Medigap plans also cover additional services not covered by Part A or Part B but typically exclude services such as dental, vision, and hearing visits.

Medicare Advantage, also known as Part C, is an alternative to Original Medicare that is offered through Medicare-approved private companies. This plan bundles Part A and Part B and often includes Part D as well. Your choice of providers is often limited to providers that are in-network for the plan you purchase. Medicare Advantage plans also often cover additional services not covered by Part A, Part B, or Part D, including vision, hearing, and dental visits. Medigap policies cannot be combined with the Medicare Advantage plan.

When to Enroll

After you’ve decided on the best coverage option, the work to enroll in your Medicare plan unfortunately doesn’t get easier. The good news is, if you’re already taking Social Security benefits, you’re automatically enrolled in Parts A and B. Because Part B comes with a monthly premium, you can choose to opt out of this coverage. Otherwise, the premiums will be deducted from your Social Security payments.

Here’s where it gets complicated. If you’re not taking Social Security but need to enroll in Medicare, you will have to sign yourself up for Parts A and B on your own. You can begin enrolling in Medicare three months before the month you turn 65. The initial enrollment period ends three months after your birthday month. To ensure coverage starts by the time you turn 65, it’s important to sign up in the first three months of the initial enrollment period.

If you’re 65 or older but still working with employer-sponsored healthcare insurance, you may be able to delay enrolling for Medicare coverage. However, there are still rules to follow, and if you don’t enroll within 8 months after losing your employer-sponsored health insurance, you could pay significant lifetime penalties when you do eventually enroll. And if you ever want to switch the type of Medicare coverage you’ve opted for, you will have to wait for specified enrollment periods each year.

Unique Life = Unique Medicare Plan

Once you’ve successfully navigated through your coverage options and your enrollment period, it’s smooth sailing. But there are other things to consider, including (but not limited to):

  • Your income level
  • Your travel plans
  • Your future healthcare needs

Unfortunately, high-income retirees will pay extra for Medicare Parts B and D. In 2021, if your adjusted gross income is above $88,000 as a single filer or $176,000 as a married couple filing jointly, you will have to pay a surcharge on your premiums.(2)

Additionally, if you plan to travel much in retirement, it’s important to know that Medicare doesn’t offer coverage outside of the U.S. If you were to get sick or suffer an injury abroad, you would have to pay for those medical costs out of pocket unless you have purchased Medigap insurance that offers travel coverage.

Finally, Medicare does not cover long-term care needs. Long-term care can be extraordinarily expensive, so it’s important to build long-term care expenses into your overall retirement plan rather than relying on Medicare coverage to protect you.

You Don’t Have to Navigate Medicare Alone

Are you overwhelmed yet? It’s understandable. Medicare is complex, and the coverage options that are right for you may not be right for someone else. Not to mention, when life changes come your way, you may need to make changes to your health plans as well. Thankfully, at Catalyst Investment Management, we can help you weigh your options while taking into account your needs, goals, and various other components of your financial plan. You don’t have to wade through the Medicare maze alone. Call us at (617) 610-0587 or info@cim.financial to schedule a call and start the process with the support of an experienced guide.

  1. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty
  2. https://www.medicare.gov/Pubs/pdf/11579-medicare-costs.pdf

About Nick

Nick Shea is founder and financial advisor at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. Over 40 years ago, Nick started reading The Wall Street Journal, building his own portfolios, and developing a passion for the financial world. He turned this interest into a career, working for many years at the former Dean Witter, now Morgan Stanley, and Charles Schwab, where he worked as an investment consultant, branch manager, and product developer. As a learning and development director, Nick created and delivered the branch management leadership program for the entire branch network. He has a bachelor’s degree in political science from Occidental College and an MBA from the University of Notre Dame. Nick specializes in serving entrepreneurs and helping retirees navigate through the complexities of the Medicare system. He is passionate about helping his clients mitigate the risks that can derail their financial goals. He is known for championing his clients’ dreams and striving to help them find the financial peace of mind they long for.

Nick is actively involved in his community, faithfully serving in the Knights of Columbus. He is also an elected member of the Windham Zoning Board of Adjustment. When he’s not working or giving back, Nick loves to read, spend time with his family, research his family’s genealogy, and travel, both in the U.S. and abroad. To learn more about Nick, connect with him on LinkedIn.

Medicare Annual Enrollment Starts Soon; Here’s What You Need to Know

By Nick Shea, MBA

As you move down your retirement checklist, do you get caught up on healthcare? Enrolling in the right healthcare coverage is an incredibly important decision that can often feel overwhelming. Not only do you want to make sure you have coverage for your medical needs (both known and unknown), but you also want to find a plan that offers good value without an exorbitant price tag. In other words, there’s a lot riding on your decision.

To help you out, here’s a summary of the multiple Medicare plans available and the various enrollment periods to be aware of. For those who are already enrolled, this is an ideal time to reassess your coverage to make sure it’s still the best fit for you.

Who Should Be Aware of Medicare Annual Enrollment?

Medicare annual enrollment is for people who are already a part of the Medicare system. Even if you have only signed up for Parts A and B, you can still take advantage of the annual enrollment period.

If you have not yet enrolled in Medicare, then annual enrollment does not apply to you. Your initial enrollment period is based upon your birthday, not a set date on a calendar. You need to sign up for coverage during the window of time that starts three months before the month of your 65th birthday and ends at the end of the third month after, for a total of seven months. If you are getting close to your initial enrollment period, carefully consider the coverage you choose. When first eligible, you can sign up for a Medicare Supplement plan under Guaranteed Issue Rights. This means you cannot be turned down for pre-existing conditions. If you don’t choose a Medicare Supplement plan during this time, you may not have this option in the future.

You may be wondering if you need to do anything about the annual enrollment period if you already have a plan that works for you. It’s important to review your plan and stay abreast of 2022 changes since doctor networks and drug formularies change from year to year. This review is especially true for those who are on a Medicare Advantage plan or a stand-alone prescription drug plan. If you’re unsure if your current plan is the right choice for next year, our team would be happy to help you analyze your current plans and assess other options.

When Is Medicare Annual Enrollment?

Annual enrollment for existing Medicare participants, though, has nothing to do with your birthday. It is at the same time every year, and everyone currently enrolled can participate in it, even if you only began Medicare the month before. This year, annual enrollment is in effect from Oct. 15, 2021, to Dec. 7, 2021. The decisions you make during that period will affect your 2022 medical coverage.

Starting in 2019 and continuing into subsequent years, there is a new open enrollment period for Medicare Advantage plans only from January 1 to March 31. (1) This open enrollment is more restrictive than the Medicare annual enrollment that happens in the fall. Also, it only applies to the Medicare Advantage plans, so any other changes need to be made during the Medicare annual enrollment that is fast approaching.

What Are My Annual Enrollment Options?

Medicare annual enrollment is the annual opportunity for all participants to change their Medicare coverage. Here are some of the changes you can make during annual enrollment:

  • Enroll in Medicare Part C (Medicare Advantage) for the first time. If you currently have Parts A and B (Original Medicare), you can switch to Part C. Part C is contracted by outside companies and offers the same coverage as Original Medicare but can include even more services.
  • Switch back to Original Medicare (Parts A and B) if you currently have Medicare Advantage (Part C).
  • Change your current Part C plan to a different Medicare Advantage plan.
  • Enroll in or drop Part D prescription drug coverage.
  • Change your current Part D plan to a different prescription drug coverage Part D plan.

What Will Annual Enrollment Changes Cost?

Each year Medicare may change the monthly premium for Part B. Currently, the standard premium for Medicare Part B is $148.50 for 2021. However, if your income is over $88,000 for a single person or $176,000 for a couple, then your premium will be higher. The premium range for high-income earners is from $297 to $504.90.

Other costs related to Original Medicare may change from year to year. For example, the Part A deductible can increase as well as the Part B deductible. The Center for Medicare and Medicaid have not released the 2022 deductible info yet.

Medicare Part A is free if you or your spouse paid into Medicare for at least 10 years, or 40 quarters. If you only have 30-39 quarters, it costs $259. The premium for less than 30 quarters is $471. (2)

Remember that both Medicare Part B (which covers most medically necessary doctor’s services) and Part D (the prescription drug benefit) have late enrollment penalties. For Part B, that looks like a 10% Part B premium penalty for every 12-month period you don’t enroll (unless you have medical coverage through an employer or a spouse’s employer). (3) For Part D, the penalty amount accumulates over time and is permanent, even once you’ve enrolled. You’ll be charged the penalty if you go more than 63 days in a row without Medicare drug coverage or coverage through other means, such as an employer plan. The amount varies and is dependent on how long you didn’t have coverage. (4) If you go long enough without enrolling, your penalties could be higher than the cost of the Part D premium. Even if you don’t need prescription coverage when you are first eligible for Medicare, enroll in the plan to avoid extra long-term costs.

Overwhelmed by Medicare Annual Enrollment? We Can Help.

A recent study conducted by the Kaiser Family Foundation found that only 6% to 13%, a relatively small percentage of Medicare enrollees, switched their Medicare Part D in any single year between 2006 and 2016. And nearly half of enrollees “rarely or never” review their Medicare plans during that same time period. According to that same study, nearly half of those surveyed said it was too difficult to compare plans. (5)

While it is true that choosing the right Medicare plan can be a complicated endeavor, it is also true that choosing the wrong plan could negatively impact your wealth management strategy. Simply put, taking your time and shopping around for the right plan will benefit your health and medical needs while also benefiting your pocketbook. The right financial advisor can help you reassess which plan will work for you. Schedule a complimentary phone consultation by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

  1. https://www.ehealthinsurance.com/medicare/advantage-all/new-medicare-advantage-open-enrollment-period
  2. https://www.cms.gov/newsroom/fact-sheets/2021-medicare-parts-b-premiums-and-deductibles
  3. https://www.medicareinteractive.org/get-answers/medicare-health-coverage-options/original-medicare-
    enrollment/medicare-part-b-late-enrollment-penalties
  4. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-
    enrollment-penalty
  5. https://www.kff.org/medicare/issue-brief/no-itch-to-switch-few-medicare-beneficiaries-switch-plans-
    during-the-open-enrollment-period/

About Nick

Nick Shea is founder and financial advisor at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. Over 40 years ago, Nick started reading The Wall Street Journal, building his own portfolios, and developing a passion for the financial world. He turned this interest into a career, working for many years at the former Dean Witter, now Morgan Stanley, and Charles Schwab, where he worked as an investment consultant, branch manager, and product developer. As a learning and development director, Nick created and delivered the branch management leadership program for the entire branch network. He has a bachelor’s degree in political science from Occidental College and an MBA from the University of Notre Dame. Nick specializes in serving entrepreneurs and helping retirees navigate through the complexities of the Medicare system. He is passionate about helping his clients mitigate the risks that can derail their financial goals. He is known for championing his clients’ dreams and striving to help them find the financial peace of mind they long for.

Nick is actively involved in his community, faithfully serving in the Knights of Columbus. He is also an elected member of the Windham Zoning Board of Adjustment. When he’s not working or giving back, Nick loves to read, spend time with his family, research his family’s genealogy, and travel, both in the U.S. and abroad. To learn more about Nick, connect with him on LinkedIn.

What Real Estate Professionals Need to Know About Retirement Planning in New Hampshire

By Nick Shea, MBA

Whether you’re a Realtor, property owner, house flipper, or landlord—buying, selling, and renting real estate is often a lucrative industry. While there is great income potential in real estate, there is risk and a learning curve to achieving success.

You’ve taken on real estate as a career or chosen it for its semi-passive income qualities. While generating income is the goal, educating yourself on the industry, time involved, and tax implications is key to making the most of your investments.

Mixing Real Estate and Retirement

Standard long-term rentals and vacation rentals are great ways to build your retirement income. But it’s important to remember it’s not 100% passive. It’s important to think about your desired retirement lifestyle before jumping in.

Will you live near your rental property? Will you be away for part of the year? How about added travels, even if only for a few days at a time?

Will you be available for the occasional “the furnace is out” call? If not, you may need to consider hiring a property manager. Turning over properties, leasing, renter communication—it’s time to start thinking about who will handle the work that comes with your real estate once you’re retired.

Also, consider how dependent you’ll be on your real estate. Building a cash reserve is often advised when relying on investments to cover everyday expenses. A property may sit empty or require large expenses. Cover these expenses with cash to ensure your real estate doesn’t derail your retirement plans.

Investing in Real Estate for Retirement

For some, investing in real estate and retirement planning are nearly synonymous. But is that where your plan ends? You may need to step back and think about how much you’re pouring into real estate compared to how your other retirement accounts are looking.

This is where proper retirement planning becomes a factor. Many choose for their real estate earnings to complement their retirement savings. No matter how stable a real estate investment appears today, a diversified portfolio can help offset unforeseen risks.

Opening an IRA is a great retirement savings mechanism for any professional. You may choose to fund an IRA with real estate earnings. Working with a financial advisor can provide concrete guidance when it comes to fund allocation between the stock market and real estate.

When it comes to buying real estate, a mortgage will require extra planning. Although you may think your assets are enough to qualify you for a mortgage, most lenders highly value a steady income.

While you will collect Social Security during retirement, this income stream is often not enough to qualify for a mortgage. It’s often necessary to pre-plan to pull funds from a retirement account for at least two months prior to purchasing a property. For this reason, you may consider solidifying any last mortgages prior to retirement.

Selling Properties for Retirement Income in NH

At some point, you’ll want to sell your real estate. While the property has hopefully provided income while under your ownership, properly timing the sale should be accounted for.

If you sell your real estate within a year of purchasing it, New Hampshire is the place to be. Where many states would collect income tax on the earnings, New Hampshire does not have a state income tax.(1) Another tax benefit of New Hampshire is no estate tax—good news for those hoping to pass on property to a beneficiary after their passing.

For properties you’ve held longer, capital gains taxes come into play. Most can expect a 15% capital gains tax if their taxable income falls under $496,600 for a married couple filing jointly. The rate jumps to 20% if above the 15% threshold.(2)

Avoiding Capital Gains Taxes

Consider a 1031 exchange to push out paying capital gains taxes. A 1031 exchange is essentially selling one real estate investment and using the money to turn around and buy another like-kind property to defer capital gains taxes.

While simple on the surface, there are details you need to be aware of:

  • Both properties must be investment properties or used for business.
  • What does like-kind property mean? Generally speaking, this means one income-generating property for another. Gains from farmland you rented out as pasture could be swapped for an apartment complex. Both are real property used for investment/business purposes.(3)
  • A qualified intermediary is required to conduct the transaction. This is a third party that holds the earnings from the first sale and sees through the transaction of purchasing the new property. Tax accountants and title companies are often able to provide qualified intermediary references.

There is also a timeline to be aware of:

  • The exchange starts the day your property is sold.
  • From the date of sale, you have 45 days to identify a replacement property.
  • To complete the exchange and avoid capital gains tax, you must have purchased and taken over ownership of a new property by day 180.

Stick to the rules and approximately 6-month timeline, and you will successfully defer paying a capital gains tax associated with the sale of your property. Meeting with a tax professional is highly advised when planning the sale of any real estate investment.

Create a Retirement Plan Based Around Your Real Estate

While real estate is a great way to fund retirement, creating a plan that incorporates your goals and retirement timeline can be tricky. Leaning on the expertise of a financial advisor can bring clarity and direction to your real estate endeavors. Our advisors at Catalyst Investment Management would love to partner with you and, when necessary, introduce you to specialists to combine efforts to tackle these complex situations.

To learn more about personalized financial planning with Catalyst Investment Management, schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

  1. https://www.revenue.nh.gov/assistance/tax-overview
  2. https://www.irs.gov/taxtopics/tc409
  3. https://www.irs.gov/businesses/small-businesses-self-employed/

About Nick

Nick Shea is founder and financial advisor at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. Over 40 years ago, Nick started reading The Wall Street Journal, building his own portfolios, and developing a passion for the financial world. He turned this interest into a career, working for many years at the former Dean Witter, now Morgan Stanley, and Charles Schwab, where he worked as an investment consultant, branch manager, and product developer. As a learning and development director, Nick created and delivered the branch management leadership program for the entire branch network. He has a bachelor’s degree in political science from Occidental College and an MBA from the University of Notre Dame. Nick specializes in serving entrepreneurs and helping retirees navigate through the complexities of the Medicare system. He is passionate about helping his clients mitigate the risks that can derail their financial goals. He is known for championing his clients’ dreams and striving to help them find the financial peace of mind they long for.

Whom Do We Serve

By Nick Shea, MBA

I recently learned that blind spots are a real thing. At a routine appointment with my optician, my doctor said some alarming words: “Now I’m going to test you for your blind spot.” Panicking, I said, “I’m not going blind!” She patiently explained to me that everyone has a blind spot where the optic nerve and blood vessels leave the back of the eye. If you’re like me, you probably thought blind spots were just a metaphor for how we miss things in life. It turns out, they’re real.

They’re also real when it comes to investing and financial planning. They can come as a result of many things, such as past experiences, lack of knowledge, and emotions. Since we can’t see our own blind spots, it’s a good idea to have an objective perspective from someone who knows what to look for so you don’t make avoidable mistakes. That’s what Catalyst Investment Management strives to do.

Whom We Serve

We founded Catalyst Investment Management to offer a solution to the lack of personalized financial advice and planning in the financial industry. Our clients are number one, always. And because we care so much about our clients’ lives and well-being, we want to see them succeed.

We make this a reality through secure, comprehensive plans that are tailored to your values, concerns, circumstances, and goals. Whether you need help with retirement planning, investment management, education planning, estate planning, insurance options, tax strategies, or all of the above, our knowledge, expertise, and care allow us to provide clarity and give insight that prevents you from falling prey to unnecessary risk and blind spots. Our goal is to be the catalyst (hence the name) that can take you from worry about retirement to excitement for the future.

Who We Serve

The clients we serve work hard every day to provide for their families and save for the future. While we serve a variety of clients, many of them are looking ahead to retirement and want to not only secure their finances, but also understand their healthcare choices. With the cost of healthcare increasing and inflation going up, the healthcare coverage you have in retirement can make a big difference in how long your money lasts. Our team can educate you and help you understand your options.

We also serve real estate agents and entrepreneurs. Many times, people in these careers don’t have steady, guaranteed income or access to retirement plans. That doesn’t mean they can’t plan for the future, and we can walk them through what retirement planning looks like when you work for yourself.

The Catalyst Difference

Care and relationship. That’s the difference we bring to the table. Our clients know without a shadow of a doubt that they have a strong support system and people who genuinely care about them when they work with us. We are proactive in our services and want to make a difference in people’s lives.

If you are ready to work with someone who is committed to helping you reach your goals and will be there for you every step of the way, we invite you to schedule an introductory call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

About Nick

Nick Shea is founder and financial advisor at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. Over 40 years ago, Nick started reading The Wall Street Journal, building his own portfolios, and developing a passion for the financial world. He turned this interest into a career, working for many years at the former Dean Witter, now Morgan Stanley, and Charles Schwab, where he worked as an investment consultant, branch manager, and product developer. As a learning and development director, Nick created and delivered the branch management leadership program for the entire branch network. He has a bachelor’s degree in political science from Occidental College and an MBA from the University of Notre Dame. Nick specializes in serving entrepreneurs and helping retirees navigate through the complexities of the Medicare system. He is passionate about helping his clients mitigate the risks that can derail their financial goals. He is known for championing his clients’ dreams and striving to help them find the financial peace of mind they long for.

Nick is actively involved in his community, faithfully serving in the Greater Salem Rotary Club, the Knights of Columbus, and on the Windham Economic Development Committee. He is also an elected member of the Windham Zoning Board of Adjustment. When he’s not working or giving back, Nick loves to read, spend time with his family, research his family’s genealogy, and travel, both in the U.S. and abroad. To learn more about Nick, connect with him on LinkedIn.

Benefits Of Financial Planning And A Sample Financial Plan

By Kim Segal, CFP®

Most (if not all) of us have dreams and goals. It might be owning a vacation home or helping your kids out with college. Maybe it’s investing in a hobby or having the time to spend with grandchildren. The dreams aren’t usually the problem; the impasse happens because people often don’t know how to transform their dreams into reality.

This is where financial planning comes in. Let’s look at some of the benefits of financial planning and a sample financial plan to give you a visual of how the process works.

A Financial Plan Is A Road Map For The Journey

Having a financial plan is like having a map for your finances. If you have gotten off track from your goals or financial destination, having a plan to refer back to is essential to getting back on course. If misplaced priorities are starting to siphon dollars from your budget, having a plan can remind you of what you are willing to make sacrifices for and keep you accountable.

In a way, writing your financial plan is like making a contract for yourself, and making a sure reminder instead of an empty promise.

A Financial Plan Covers Your Bases

Financial plans often address a myriad of concerns and goals, from college planning to retirement income strategizing. Depending on your needs, your plan may narrow in on one element or address multiple goals you’d like to achieve over time. We believe a good financial plan should give you a detailed, complete view of your current financial situation, a thorough modeling of where you want to be, and the actions you need to take to reach those goals. It should address all the pieces of your financial puzzle, from stresses and fears to your values and dreams, and include risk factors, cash flow, retirement, estate planning, taxes, education, and income strategies to help bring you clarity and guidance. It is through our planning process that we can help you prepare for life’s expected and unexpected circumstances.

Your plan also serves as an objective sounding board; because it is customized to your life and lays out the steps you need to take to reach your desired future, it tells you what you need to hear, even if you don’t want to hear it. It shows you if you have financial blind spots or are making decisions that might make you feel good now but aren’t beneficial to your future.

A Financial Plan Is Built On Your Life

Your life is unlike anyone else’s. Using a one-size-fits-all template isn’t going to feel valuable or keep you on track when the rubber meets the road. Designing a personalized financial plan takes into account your dreams, goals, concerns, and life circumstances. Maybe you have some obstacles that prevent you from saving as much as you’d like to. Your plan will take that into account and help you find solutions. Maybe you have deeply held values about giving back to the community. Your financial plan will then include charitable goals and tax planning to maximize your generosity. Having a customized guide will empower you to take the daily actions necessary to reach the life you dream about.

It’s also important to remember that a financial plan is not a one-and-done deal. A solid plan grows with you and adapts as you reach milestones and face major life changes that not only change your circumstances, but also your priorities, such as marriage, the birth of a child, or a career change.

Let’s Take A Closer Look

The following sample plan looks at a fictional client’s lifestyle income plan and how we developed it, including identifying their goals, creating a balance sheet, reviewing their cash flow, and more.

Keep in mind that this is only a hypothetical plan presented to illustrate what a client’s plan may resemble should they work with me. The characters and circumstances are completely fictional and are for illustrative purposes only. Be sure to seek the advice of a qualified professional for your particular situation and not rely upon any of the information herein to make personal financial decisions.

We provide an overview of your current situation. With just one glance, you can see a big picture of your financial life, including income and expenses, assets broken down into specific categories, short-term and long-term liabilities, and cash flow assumptions.

With all that information in hand, your plan will go on to analyze every piece of your financial puzzle, showing detailed projections for income, expenses, assets, and mapping your progress toward your goals. This will show you where you will stand in retirement and give you something to aim for as you draw closer to your retirement years.

Get Started On Your Plan!

If you want to see even more features of our financial plans, download our full sample plan here. Once you’ve taken a look, reach out to us at Catalyst Investment Management today to schedule a no-obligation consultation, and together, let’s find out if we’re the right people for you to depend on during your journey to a comfortable retirement. You can schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

About Kim

Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ (CFP®) at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.

What’s Your Long-Term Care Plan?

By Nick Shea, MBA

It’s no secret that Americans are living longer and longer. A longer life expectancy brings more years with loved ones, however, it also increases the chances of needing long-term care. In fact, 70% of Americans will need some form of long-term care during their lifetime. But most people never plan for the inevitable (1) — and long-term healthcare is expensive. While you are still healthy, it’s wise to start a plan for long-term care along with your retirement plan. There are many options, so let’s go through some of the basics of long-term care to help you create a plan for your future. It’s also important to note that Medicare does not cover long term care costs.

The Truth About Long-Term Care Costs

Long-term care costs are so high that they could potentially wipe out the bulk of your retirement funds. On average nationally, it costs $280 per day or $8,517 per month for a private room in a long-term care facility. (1) To make matters worse, due to their longer life expectancy, women pay significantly more than men for long-term care. The average amount of time women require long-term care is 3.7 years (or around 44 months), adding up to $374,748 in expenses in today’s costs for that private room. (2) By comparison, men who need long-term care utilize it for an average of 2.2 years (or around 26 months). That projected expense equals $221,442.

And costs are only projected to increase. From 2019-2020, the median annual cost for home health aides rose over 4.5 percent. (3) By 2030, the average cost for long-term care services is expected to double. (4) These costs can vary based on the level of care and amenities needed, as well as the size of the room and the location, so your first step in making your own long-term care plan is to decide what type of care you prefer.

What’s Your Ideal Long-Term Care Situation?

If you have a family history or early signs of Alzheimer’s or dementia, or if you suffer from a chronic disease that will require ongoing care or daily assistance, look into facilities that offer the care you’ll need, and share your thoughts with your family. Would you prefer to live in a long term care facility or would you like nurses and assistants to come to your residence? Do you want a religious community of care? There are several preferences to take into consideration when considering your long-term care plan.

Having the option to make these choices yourself lends much-needed autonomy to your long-term care plan. If you wait until you need it, you may not be in good enough health to make the decision, or the size of your savings might determine the care you receive. In addition, it is generally less expensive and easier to obtain long-term care insurance when you are healthier and younger.

Whether you’re worried about potential health concerns or want to protect your hard-earned wealth, it’s important to understand the long-term care insurance options available to you and whether or not a policy makes sense for your lifestyle and needs. It also helps alleviate the burden on your kids if you have a plan in place.

Your Long-Term Care Plan Options

Long-term care coverage isn’t cheap, but it pales in comparison to long-term care costs. Here are some options to consider when creating your long-term care strategy.

1. Traditional Long-Term Care Insurance

With traditional long-term care insurance, you pay a premium in exchange for the ability to receive benefits if they are needed. If you need long-term care at some point, the policy provides you with money to pay for it. If you never need long-term care, then you receive no benefits. It’s a “use it or lose it” policy.

Just like any insurance policy, you will have some coverage choices to make. At CIM we work with a number of professionals and companies to help people navigate the process.

Customized Coverage

You can choose the level of insurance you want and select the daily benefit amount for care in a long term care facility. You can also add home-care coverage if that is a priority for you. In order to choose the right coverage amounts, you need to know what the cost of long-term care looks like in your state. For example, a private room at a nursing home in New Hampshire will cost an average of $11,315 a month, and hiring a home health aide could set you back almost $70,000 for the year. In states such as Massachusetts this cost is even higher.

Length Of Coverage

You must also decide on the length of time you want the benefits to be paid. Common options are one, two, three, or five years, or for your lifetime. Logically, the longer the benefit period, the higher the premiums you will need to pay.

Benefit Stipulations

Your policy will also indicate “benefit triggers,” or conditions which must exist in order to receive benefits from the insurance company. A tax-qualified plan only pays benefits once you are unable to perform two of six activities of daily living without substantial assistance for at least 90 days, or have a cognitive impairment like Alzheimer’s. Non-tax-qualified plans may have less-restrictive benefit triggers.

Inflation And Premiums

If you want, you can have your benefits increase with inflation to match future care costs. It is also important to note that premiums can increase as they are not usually set in stone.

2. Life Insurance With A Long-Term Care Rider (1)

With a traditional long-term care policy, people sometimes feel that if they buy it and don’t use it, they have wasted their money. Because of this, several hybrid products have emerged. One popular solution is a life insurance policy with a long-term care rider. This strategy is enticing because if long-term care is needed, the funds are available through your policy’s death benefit. If you don’t spend the total benefit available, your beneficiaries will receive the balance upon your death (tax-free), thus no wasted money.

If you need life insurance, getting your long-term care coverage as a rider may be a good option. This way, someone will be benefiting from the premiums you are paying, whether it is you or your heirs. Plus, because the policy accumulates cash, the insured individual can access it if needed, allowing them to recoup a portion or all of their premiums. This type of policy involves permanent life insurance which, of course, has higher premiums than term insurance. The long-term care rider further increases the premium cost.

3. Annuity (1) With A Long-Term Care Rider

If you don’t need life insurance, another combination product may be better suited to your situation. If you purchase a fixed annuity, you may have the alternative of adding a long-term care rider onto the contract for an additional cost. Since 2010, the IRS allows for the long-term care portion to be used tax-free. (1)

After purchasing the annuity, you would select the amount of long-term care coverage you want, often two to three times the face value of the annuity, as well as the length of time you want coverage. Finally, you have to decide if you want inflation protection.

This option makes money available to you if you need long-term care. Otherwise, if you have not annuitized, you can cash out the annuity when it matures (in which case you would lose your long-term care coverage) or let it accumulate and ultimately pass on the assets to your heirs.

Obtaining long-term care coverage through an annuity can be appealing because it is generally less expensive than stand-alone insurance and you can receive coverage without medical underwriting. Annuities tend to be less common than the other choices, though, because of the current low interest rates available from the annuity and the large up-front investment.

4. Save On Your Own

Consider starting a savings plan specifically for future healthcare needs. One option is to create a separate, high-yield savings account and contribute a specific amount every month, building a contingency fund for whatever healthcare expenses come your way. If you end up not needing long-term care, the money is still yours and can be used for your living costs, unexpected expenses, or an inheritance for your heirs.

Start Planning Today

Regardless of your age or stage of life, it’s crucial to plan for long-term care. This important part of retirement could derail your savings if you neglect to properly plan and thoughtfully consider your options. We at Catalyst Investment Management hope this article has sparked some discussion with your family about your choices as you age and need care.

In addition to your loved ones, we would be honored to partner with you on your retirement journey and help you navigate the decision-making process. If you have any questions or concerns regarding your financial future, please schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

(1) https://www.genworth.com/aging-and-you/finances/cost-of-care.html
(2) https://www.genworth.com/aging-and-you/finances/cost-of-care.html
(3) https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
(4) https://www.elderlawanswers.com/home-care-costs-rise-sharply-in-annual-long-term-care-cost-survey-17435
(5) https://www.americanactionforum.org/research/the-ballooning-costs-of-long-term-care/
(6) Riders are available for an additional fee; some riders may not be available in all States.
(7) Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59-1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.
(8) https://longtermcareinsurancepartner.com/blog/using-annuities-to-pay-for-long-term-care

About Nick

Nick Shea is founder and financial advisor at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. Over 40 years ago, Nick started reading The Wall Street Journal, building his own portfolios, and developing a passion for the financial world. He turned this interest into a career, working for many years at the former Dean Witter, now Morgan Stanley, and Charles Schwab, where he worked as an investment consultant, branch manager, and product developer. As a learning and development director, Nick created and delivered the branch management leadership program for the entire branch network. He has a bachelor’s degree in political science from Occidental College and an MBA from the University of Notre Dame. Nick specializes in serving entrepreneurs and helping retirees navigate through the complexities of the Medicare system. He is passionate about helping his clients mitigate the risks that can derail their financial goals. He is known for championing his clients’ dreams and striving to help them find the financial peace of mind they long for.

Nick is actively involved in his community, faithfully serving in the Greater Salem Rotary Club, the Knights of Columbus, and on the Windham Economic Development Committee. He is also an elected member of the Windham Zoning Board of Adjustment. When he’s not working or giving back, Nick loves to read, spend time with his family, research his family’s genealogy, and travel, both in the U.S. and abroad. To learn more about Nick, connect with him on LinkedIn.

What Women Need To Know About Financial Planning And Divorce

By Kim Segal, CFP®

Divorce is not easy for anyone, but women are particularly vulnerable to financial hardship after a divorce. The reasons why divorce affects women differently abound, but financially, women are typically in a different position than their spouses. Women typically make less than their male counterparts for starters, meaning they stand to lose over 50% of their household income after a divorce between a heterosexual couple.(1) Secondly, women typically work fewer years on the whole compared to their male equivalents because caregiving responsibilities fall mostly on their shoulders.(2)

This means that women tend to go through a divorce being more financially disadvantaged than their male counterparts because there is an income discrepancy in most heterosexual relationships. Luckily, at Catalyst Investment Management, we have plenty of methods that we employ to make sure women are taken care of during this stressful time. Here are just a few ideas that typically help our clients navigate through the murky waters of divorce.

Having experienced my own divorce, I can relate to the emotional, family and financial impacts that result from divorce, even if it is amicable.

Make A New Budget

Men outearn women in 77.8% of heterosexual relationships, while women are still the primary caregiver of the children in most marriages. However, even if you both contributed equally to your financial situation and child-rearing duties, your financial situation is going to look different after the divorce.

That’s why it is fundamental to create a new financial plan that takes into account your priorities and budgetary concerns. If you receive the primary home in a divorce, while also getting full or partial custody of the children, you need to create a budget that takes into consideration the ongoing costs related to child-rearing and house maintenance, for example.

Create A New Financial Plan

Your previous wealth strategy took into account a different future and different financial outlook. It is time to create a new wealth creation and management strategy that takes into consideration your current financial outlook. This can be challenging, but you do not need to worry. Financial advisors have plenty of experience creating new wealth management plans post-divorce that take into consideration the differing financial needs of women, who are likely going to live longer and therefore have more retirement years to adjust for. We can recommend new strategies that will help you maintain your lifestyle well into retirement.

A Potential Blind Spot

One asset often overlooked in divorce financial negotiations is employer compensation in the form of stock options and restricted stock . If your spouse has received this type of compensation, you need to have a financial planner analyze the situation. Even if these assets don’t have a current value, they may prove to be quite lucrative given their long-term nature. Ignoring your spouse’s employee stock compensation could cost you a substantial sum of money. Your spouse earned this compensation during your marriage. You should be able to enjoy the fruits of this labor.

Do Not Forget About Retirement Assets

When you are in the thick of negotiating a divorce with your spouse, there may be a ton of contentious issues to work through. Questions surrounding child support, custody, and alimony payments may be at the top of the list, but do not forget to discuss a fair division of your retirement assets. Also, keep in mind that what is fair may not be a 50-50 division of the assets.

This is because women live longer than men and have more catching up to do with their retirement investments than men do. Women make less than their male counterparts and spend fewer years in the workforce because of child-rearing responsibilities. All of these factors combined put women––especially divorced women––in a disadvantaged situation when it comes to retirement planning.

Getting A Divorce?

Very few people get married thinking that the marriage will end in a divorce; however, it is a very common hurdle in life, with between 40% to 50% of marriages ending in divorce.(3) It is a good idea to speak with a financial advisor as you negotiate the terms of the divorce to ensure that you will have the proper wealth management strategy throughout your life. You can schedule a call by reaching out to us at (617) 610-0587 or emailing info@cim.financial.

(1) https://www.bls.gov/opub/reports/womens-databook/2016/home.htm
(2) https://www.pewresearch.org/fact-tank/2015/10/01/women-more-than-men-adjust-their-careers-for-family-life/
(3) https://www.apa.org/topics/divorce

About Kim

Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ (CFP®) at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners, pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.