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5 Life Transitions and Times When a Financial Advisor is Needed

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When it comes to your financial future, the decisions you make today can change the course of your life. Choosing the right investment strategy, ongoing tax planning, establishing an estate plan, analyzing and potentially purchasing life insurance, considering long-term care, preparing for retirement, etc.—navigating these complex matters can quickly become overwhelming.

There are particular events and transitions in life when having a trusted thinking partner to help think through financial decisions can be invaluable. The following is a list of situations in which the help of an expert could significantly improve your financial and personal outcome.

1) You are Nearing Retirement: As many pre-retirees near closer to retirement, they become filled with self-doubt regarding their retirement plan. Have I saved enough to not outlive my assets? How will I create my retirement paycheck to cover my expenses? Have I adequately prepared for the possibility I may one day need care? Maximizing retirement income can be tricky, but a trusted financial advisor can help you build a withdraw timeline, mitigate taxes, decide when it is best to begin taking social security benefits, and position your investments in such a way that manage risk for the longevity of your portfolio.

2) You are Getting a Divorce: Amidst the emotional turmoil of a divorce, retaining a sense of clarity regarding your finances can be difficult. And when it comes to a divorce settlement, there aren’t any second chances. One of the most overlooked aspects of divorce settlements is the taxes an individual will have to pay on awarded assets. Not only can a financial planner help you to organize your finances for your new future, they can overlook your divorce settlement to ensure that any assets you stand to gain will be fair and equitable after taxes have been assessed.

3) You Have Lost a Spouse: The loss of a spouse can be one of the most devastating transitions an individual will encounter in his or her lifetime. The grief can be unbearable and there may be financial decisions that demand attention. For some widows, this may be the first time in their lives they are charged with handling their own finances. Your financial advisor can help you with the process of setting a timeline for financial decisions, meeting any important deadlines, settling your spouse’s estate, filing the necessary paperwork, and ensuring you have a steady source of income as you move forward.

4) You Inherited Money or Received a Windfall: There is a reason why so many lottery winners and second, third, and fourth generations of wealth end up in bankruptcy: managing a sudden influx of money is challenging, both in financial skill and emotional readiness. The right financial advisor will assist you in evaluating both your short and long-term goals and help devise a roadmap to get you there.

5) You Manage Your Own Investments: The biggest threat to an investor’s success is often himself. For the past 25 years, DALBAR, a leading financial services market research firm, has been performing a Quantitative Analysis of Investor Behavior (QAIB) which measures “the effects of investor decisions to buy, sell and switch into and out of mutual funds over short and long-term timeframes.” Time and again, their research illustrates that individual investors panic when markets turn south. They subsequently sell their assets when the market is low, and want to return again when the market recovers. But selling low and buying high is the exact opposite of a successful investment strategy. Financial advisors can (a) help investors maintain perspective when the market conditions are unfavorable and (b) keep them on track to meet their financial goals despite a volatile financial climate.

But the right advisor does so much more than just guide you to make wise financial choices during these transitions, the right advisor supports you while you manage the financial and emotional aspects of these changes, as well. Ideally, your advisor will:

• Reduce the complexity and overload of these life events
• Empower you to face these new circumstances with confidence and optimism
• Undertake some of the less pleasant tasks
• Provide ongoing encouragement
• Save you time and energy

At Northstar Financial Planning, we are Certified Financial Transitionists® and Registered Life Planners who have been specifically trained to approach both the financial and behavioral aspects of our clients’ financial planning needs. We understand the mental and emotional toll that life’s transitions can place on an individual and seek to empower those experiencing such change to see these events as opportunities for a brighter future. If you or a loved one is experiencing, or anticipates facing, one of the above transitions, please feel free to contact us today. One of our advisors would love to meet with you and discuss your possibilities.

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Have You Factored Long-Term Care into Your Retirement Plan Yet?

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When it comes to retirement planning, the possibility of eventual long-term care is often overlooked. It’s easy to disregard the potential costs associated with aging when you are young but should you or a loved one become physically or cognitively impaired, you’ll find the cost of care can quickly consume your income and deplete your retirement savings.

The U.S. government estimates that nearly 70% of Americans turning 65 will require some form of long-term care, whether that be part-time assistance completing daily activities, full-time care at an assisted living facility, or any level of care in between. The mistake many retirees make is planning to rely solely on private health insurance or public programs to cover these expenses; they are surprised when they discover their needs are either (a) not covered or (b) not covered for long enough. Suddenly, these individuals could be accruing more in care related costs than their income can support.

Of course, the future need for long-term care cannot be predicted, but it can be prepared for as a piece of your overall retirement plan.

What is Long-Term Care?

Essentially, long-term care describes a scope of services, supports, and/or medical care that individuals with disabilities, chronic illnesses, injuries, or diminished mental or physical capabilities may need to meet their personal care or to complete daily tasks. These often include bathing, eating, moving around the house, grocery shopping, taking medications on time, completing housework, and more.

Estimating Long-Term Care Costs

Just like any other expense, the cost of long-term care will vary by geographic location and the age at which care is needed. Genworth Financial provides a helpful tool for estimating care costs based on state, metropolitan region, and timeline. Based on their research, the following table illustrates the annual median costs of care by type in New Hampshire in 2018:

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Genworth Cost of Care Survey 2018, conducted by CareScout®, June 2018

1 Based on annual rate divided by 12 months
2 As reported, monthly rate, private, one bedroom

Of course, the duration and level of long-term care will vary from person to person, but those aren’t the only factor to take into consideration when estimating long-term care costs:

  • Statistically, women live longer than men, and therefore, (a) may need care for a longer duration of time or (b) may outlive their spouse and need a higher level of care without the spouse around to help out
  • Individuals who desire to stay in their own home may need to budget for home safety modifications
  • Individuals with adult children nearby may be able to rely on them for occasional assistance with things like transportation or grocery shopping, reducing the need for a higher level of paid care

Putting a Plan in Place

Long-term care needs can put a significant amount of financial and emotional stress on individuals and their families, but having a plan in place to cover such expenses will significantly ease these burdens and allow you to keep your retirement nest egg intact.

  • Traditional Long-Term Care Insurance:  Investing in long-term care insurance involves paying into a policy now to cover the potential costs of care in the future. Like any other insurance policy, your premium will correlate with the benefits you choose; the higher or longer the level of care, the pricier the premium. However, your personal health and medical history at the time of purchase will also affect how much you’ll pay for coverage, which is why premiums tend to increase with age and can even become unobtainable for those with deteriorating health.

But, long-term care insurance is expensive and many pre-retirees have a hard time swallowing the ongoing premium payment without a guarantee they will ever need to cash in on the benefits. Traditional long-term care policies render zero benefits once the policy lapses.

  • Hybrid Life Insurance Policies: As a result, some retirees are turning to “Hybrid Life Insurance Policies,” which are combined life insurance policies with long-term care “riders.” A rider is an add-on to a life insurance policy that will provide long-term care or chronic illness benefits in the event they are needed. Riders can help protect from inflation and provide designated beneficiaries with tax-free death benefits when the policyholder passes.

Or, if your policy has cash value, you may be able to access those funds through withdrawals, policy loans, or even by selling the policy as a life settlement option.

If you decide that an insurance policy fits into your long-term care plan, be aware that the different products on the market vary significantly in regard to offerings and cost. You’ll want to avoid overpaying for benefits you don’t need, but also ensure the benefits of your policy will be sufficient to cover the rising cost of care.

However, insurance policies aren’t the only option when it comes to funding long-term care expenses. If your circumstances allow, you may be able to rely on IRA withdrawals or various types of investment income to cover these expenses. But like any other piece of the retirement planning puzzle, your decision on how to fund long-term care should not be made in isolation, but in the context of your overall financial picture.

Have you accounted for potential long-term care costs in your retirement plan? If you have yet to put a plan in place, or are in need of a retirement plan evaluation, we would love to hear from you. The Certified Financial Planning ® professionals at NorthStar Financial Planning specialize in helping individuals, couples, and families prepare for a fulfilling and financially secure retirement. Contact us today for a complimentary  Get Acquainted meeting to discuss how we may be of assistance.


According to an annual study conducted by Genworth Financial, these were the 2018 National Annual Median Costs for varying types of long-term care:

  • Homemaker Service- $48,048
  • Home Health Aid- $50,336
  • Adult Day Healthcare- $18,720
  • Assisted Living Facility- $48,000
  • Semi-Private Room in a Nursing Home- $89,297
  • Private Room in a Nursing Home- $100,375

Long-term care needs can put a significant amount of financial and emotional stress on individuals and their families, but having a plan in place to cover such expenses will significantly ease these burdens and allow you to keep your retirement nest egg intact.

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Rush Hour, Market Volatility, and Evidence-Based Investing: Part II

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Actively vs. Passively Managed Funds 

There is no lack of debate in the financial community regarding which type of fund is superior: actively managed versus passively managed funds.

Actively managed funds are a group of funds that are controlled by a manager or team of managers who aim to outperform the market with the frequent buying and selling of equities based on that manager’s expertise, experience, or personal judgment—similar to the types of drivers who exit the highway in rush hour believing they’ll find a quicker route and only return when the congestion appears to have cleared. Due to the nature of this active management, these funds carry higher expense ratios and charge heftier management fees than their passively managed counterparts.

Passively managed funds, by contrast, aim to follow a market index. There is no management team making personal investment decisions on everyone’s behalf. This strategy involves building a portfolio, or purchasing index funds, that seek to track and mimic the performance of a benchmark index, such as the S&P 500. Stocks are bought and sold when the market index moves in or out of a certain range, not according to an active manager’s prediction or latest trend.

Get on the highway and stay the course!  Due to their low turnover rate, passively managed funds and index funds, alike, are low-cost and often tax efficient. Additionally, they are generally more diversified than actively managed funds, and, as a result, provide greater control over a portfolio’s risk exposure.

Essentially, passively managed funds and index funds rely on the efficiency of the market to provide lower-risk, long-term returns, rather than trying to outrun market volatilities for risky, short-term gains.

As Dimensional Fund Advisor’s David Booth asserts, “Where people get killed is getting in and out of investments. They get halfway into something, lose confidence, and then try something else. It’s important to have a philosophy.”

As evidence-based practitioners, we couldn’t agree more. We rely on historical evidence to inform our decision to favor globally diversified portfolios of low-management fee, passive type funds in asset allocations appropriate for each investor.

At the end of the day, no one can control the traffic or the market, but you can control how you choose to handle each.

If you feel your current investment philosophy is not aligned with your long-term investment goals, one of our Certified Financial Planner™ professionals would love to discuss the benefits of evidence-based investing with you. Contact us today for a complimentary Get Acquainted meeting. We look forward to meeting you.

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Rush Hour, Market Volatility, and Evidence-Based Investing: Part I

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Have you ever been caught in rush hour traffic? Do you find yourself feverishly searching your GPS for a faster route the longer you are stuck in it? Maybe you contemplate whether you’re better off waiting out the bumper-to-bumper gridlock on the highway or taking your chances with city traffic lights. You know that your chances of outrunning highway traffic with an alternate route are slim, but your impatience is chipping away at your sense and you strongly consider it. Plus, look at all those other cars clearly getting off to avoid the slowdown!

But what does rush hour traffic have to do with investment philosophies?

Rush hour traffic is like market volatility and your traffic decisions are your investment philosophy. You either believe it’s more advantageous to get on the highway and stay the route despite possible slow-downs, or you believe in exiting the highway when things back up and entering again when the coast looks clear.

The former ideology is similar to Evidence-Based Investing (EBI), an investment philosophy that is based on long-term buy and hold strategy. Evidence-based investors use asset allocation and diversification to construct their portfolios in such a way that they reap the greatest rewards by getting on the metaphorical highway and waiting out any slow-downs that may occur, trusting that things will inevitably pick up. As such, EBI proponents invest in low-cost, passively managed index funds that operate according to these same ideals.

Asset Allocation and Diversification

Asset allocation is the process of dividing up your investable assets among different asset classes, which include (1) domestic, (2) developed international, and (3) emerging market versions of:

• Stocks/ Equity: ownership in a business
• Bonds/ Fixed Income: a loan to a business or government
• Hard Assets: equity in tangible assets such as real estate
• Cash or cash equivalents

Asset classes can be further subdivided by dimensions of expected sources of return. For example, stocks can be classified by company size (small-, mid-, or large-cap) or business metrics (value or growth). Bonds can be classified by type (government, municipal, corporate), credit quality (high or low), and term (short, intermediate, long).

Which assets you hold, and in what proportion, will vary by investor and will be largely based on both your timeline, tolerance for risk, and your need to take risk to meet your financial goals.

Your timeline is the expected number of years you’ll be investing to reach your financial goal and your risk tolerance level is your ability or willingness to lose part or all of your original investment for a higher rate of return. For example, someone with a longer timeline may feel comfortable investing in riskier asset classes early on, but choose fewer risky investments as they near closer to their goal date (retirement, for example).

All investments bear some level of risk, but without question, some are riskier than others. Investing in multiple asset classes can help to reduce overall risk while still positioning yourself for long-term returns.

The goal is to pinpoint which allocations seem to best serve the needs of the portfolio at hand. Different ends require different means.

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The Future of Social Security Benefits

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One of the most important elements of retirement planning is analyzing a host of unknown variables including our predicted life expectancy, our future expenses, and the income we will need to cover those expenses without sacrificing our quality of life. More often than not, retirement income is generated from multiple different sources such as pension plans, IRAs, and investment income, to name a few. It’s likely you’ve also imagined social security benefits funding a portion of your retirement. After all, we spend our entire working lives paying into the program with the expectation of receiving future benefits.

However, over the past decade, as more and more baby boomers have left the workforce and started receiving their benefits, the Social Security Administration has calculated that the current tax revenues, and the liquidation of the bonds held in the Social Security trust, will only be able to maintain Social Security payments until the year 2034. Such an announcement has alarmed many pre-retirees who foresaw relying on those payments to bridge the gap between their income and expenses.

But, not all hope is lost. It’s a common misconception that Social Security benefits will cease entirely after the bonds held in the Social Security trust are depleted. Luckily, this isn’t the case. Since the majority of benefits are funded by payroll tax revenue, some benefits will still remain. The idea is that FICA taxes paid by current workers will directly fund benefit payments for retirees.

The Social Security Trustees anticipate the program will be capable of paying approximately 79% of benefits in 2034 with a gradual shift to 71% of benefits through 2089.  So while payments will not dissipate entirely, they will take a 21% cut in 2034, and a 29% cut over time if nothing is done over the next fifteen years to ameliorate these projected shortfalls.

Ultimately, though, there are a number of mild strategies that could increase the longevity of the program such as boosting the Full Retirement Age or reducing the annual cost-of-living (COLA) adjustment by 1% each year. So despite the popular media hype, social security isn’t quite on its way out and should not be discounted as a possible source of retirement income.

Naturally, however, these projections have incited quite a bit of doubt in pre-retirees, causing them to question whether they should claim their benefits while they can or delay in an effort to guard against bad market returns and high inflation. But, the answer is neither simple nor universal.

First and foremost, the decision to accept or delay Social Security benefits should not be made in isolation, but in the context of your overall financial framework. In order to time your social security benefits in a way that maximizes long-term income, you’ll need to analyze the projected performance of the other assets in your portfolio. Fundamentally, a delay is only fiscally beneficial if it generates returns in excess of those you would receive from other investments of comparable risk over the same period of time. The matter is further complicated for couples coordinating claims to maximize survivor and spousal benefits.

Since it’s unlikely Social Security benefits will be completely depleted in this lifetime, it’s safe to include them as a viable piece of your retirement planning puzzle. Consult with your financial advisor about putting together a timeline for claiming benefits that will augment your retirement income and complement your long-term financial plans.

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Paying for College: 3 Smart Alternatives to Borrowing

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As the cost of college tuition and fees continues to skyrocket, so too does the consumer debt incurred to fund post secondary education. According to Forbes, student loans make up the second highest category of consumer debt, only behind mortgages and ahead of credit card and auto loans. With 44 million borrowers owing in excess of $1.5 trillion in U.S. student debt alone, it’s no stretch to say that countless Americans are caught in a student debt crisis that shows no sign of improving.

Unfortunately, students aren’t the only ones going into debt to fund their education. Many parents are depleting their own retirement savings or incurring personal debt in an effort to send their children to their “dream school.”

Luckily, there are alternatives to borrowing which can save both parents and students from digging themselves into a hole of debt—grants, scholarships, work-study programs, and part-time jobs are all viable ways to contribute to the rising cost of educational expenses.

Alternative Funding Options

1) Grants

Grants are need-based monetary gifts distributed to eligible high school graduates and college students for the purpose of funding their college education.

Federal grants, state-level grants, and college grants are awarded to students based on the financial need exhibited by their FAFSA (Federal Assistance for Student Aid) application. The amount for which a student qualifies is calculated based on his or her family’s ability to pay, also referred to as the Expected Family Contribution (EFC). Accordingly, a number of middle and high-income families refrain from applying at all as they assume their income is too high for their student to qualify.

But according to Mark Kantrowitz, publisher and VP of research at, millions of dollars in federal and state-level grants are being left on the table each year. In 2015-2016, nearly 6 million students failed to file the FAFSA, and of those, roughly 35% would have qualified for some type of grant. In other words, students who fail to file the FAFSA are potentially missing out on thousands of dollars of “free money” to contribute to their education costs.

Grants, like scholarships, are an ideal source of funds as they give students access to much needed resources now, and save them from high loan repayments in the future.

2) Scholarships

According to the most recent federal statistics, approximately 60% of undergraduates use scholarships to help pay for college. Like grants, scholarships do not have to be repaid.

Scholarships are merit-based* awards bestowed upon highly qualified students by colleges, local organizations, charity groups, and private funding for any number of distinctions:

  • High academic achievement
  • Athletic ability
  • Artistic capabilities
  • Highly developed foreign language skills
  • Technological savvy
  • Extensive volunteer work and community involvement
  • Singing or songwriting
  • Etc.

This list is far from exhaustive. In fact, the U.S. News and World Report cites that billions of dollars are rewarded in scholarship money each year for applicants of countless different capabilities, from metalworking to the culinary arts, nursing to robotics. In our home state, the New Hampshire Charitable Foundation annually awards over $40 million in scholarships and grants, alone.

Local and statewide foundations such as these are a great place to start your search, as they narrow the qualifications down to your specific region. But, popular sites such as,, and, catalogue the nationwide and worldwide scholarships available and provide details on how to apply.

*Some merit-based scholarships still have a need-based component to them.

3) Work-Study or Part-Time Jobs

Work-study programs are college-led, college-funded jobs on or nearby campus which a student qualifies for only after having filled out and submitted the FAFSA. Wages are paid directly to the student, but the annual amount distributed for work cannot exceed the award amount for the year.

Students are usually notified of their eligibility for work-study in their financial aid package. But, if a student doesn’t qualify for these programs, a part-time job may be the answer to the bridging the gap in expenses.

More often than not, colleges will run closed-loop, student-access only digital hubs where students can look for work with employers seeking specifically to hire college employees. These jobs range from food service to babysitting to proofreading to plant watering, but can be flexible ways for a student to earn money without disrupting his or her academic schedule. Students should inquire with their college’s student services office for information on this type of digital resource.

Essentially, it’s best to avoid accruing excess debt whenever possible. A student who gets through college with the minimal amount borrowed, will be better situated to make smart financial moves in the future, such as financing a family home or saving for retirement.

If you are still unsure about the best way to fund your children’s college education, our Certified Financial Planner™ professionals and Financial Transitionists® would be happy to discuss your options with you. Contact us today for a complimentary Get Acquainted meeting. We look forward to helping you secure a postsecondary education without comprising your overall financial wellbeing.   

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5 Money Mistakes and How to Avoid Them

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Have you ever heard someone say that experience is the best teacher? How about “there are no mistakes, just lessons”?

We’d like to take a slightly different tack on these age-old maxims. Experience isn’t the best teacher, but someone else’s experience can be. Learning from other people’s mistakes can save us a lot of grief.

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Looking to Sell Your Business? Here’s Your Financial Planning Checklist

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After years of investing your time and energy into building a successful business, you’ve decided it’s time to move onto the next chapter of your life. Whether you are heading into retirement or simply want to focus on a new business venture, having a well thought out transition plan in place can help to maximize your profit, mitigate post-sale taxes, and secure the financial future you desire.

Since selling a business can be a complex endeavor, we’ve put together a checklist to help you make the planning process go as smoothly as possible.

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When Two Becomes One

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Financial Considerations for Managing Life After the Loss of Your Spouse

Whether the passing is sudden or somewhat expected, losing a husband at any age is traumatic and can raise many questions and worries about the future.  The term “widow” conjures up thoughts of loneliness, yet thousands of women suddenly find themselves facing this reality every year. It is a major transition in life, and too often important decisions and responsibilities are set on hold or sometimes forgotten altogether.

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December 2018 Tax Reform and Year End Planning

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The recent tax reform, officially known as the Tax Cuts and Jobs Act (TCJA) of 2017, was the biggest change in the tax code in over 30 years. The overhaul covered both individual and corporate income taxes. Most will see their tax bill decline when they file, but a few folks may see a sharper bite.

Let’s touch on some of the changes at a high level.

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