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4 Financial Tips in Fashion for Fall
09/19/2011 9:43 am EST
Not all of these are easy, but you can take advantage of this slow season to ensure your assets are safe and maybe even get a better deal in the process, writes MoneyShow.com personal finance expert Terry Savage.
There’s a certain amount of energy associated with the fall season. Maybe it’s left over from the days of our childhood, when autumn meant new school supplies, new clothes, and the start of a new school year.
Fall is also a good, uncluttered time to take a fresh look at your finances. That gives you time to make adjustments before the frenzied holiday season.
Right now, your tax preparer is bored, your insurance agent is dozing, and your stockbroker is lonely. In other words, if you take action now, you’ll get a lot more attention from the financial professionals you need to re-think your situation and plan for the future.
Life Insurance Checkup
Most people buy life insurance, cringe when the premium payment notice arrives, and then forget about it. But life insurance styles and prices change frequently—just like fashion. How long has it been since you’ve had a life insurance checkup?
While you don’t want to change policies unnecessarily, because that will trigger a new "contestability" period (typically at least two years), sometimes it makes sense to update or increase your coverage.
For example, if you purchased a 20-year level term policy a decade ago, you’re getting closer to the end of that fixed price period. At the time you bought your insurance, you might have thought you’d need life insurance only until your kids graduated college, or until the mortgage was paid off. But now, getting older, you might want to extend coverage for the benefit of your spouse.
There are two possibilities. You could, if the policy allows, convert the policy to a cash value policy—without evidence of "insurability" if the policy allows. This might be the best solution if your health has changed, making it difficult to qualify for a new policy.
Or you could shop online for a new policy at a site like Accuquote or SelectQuote. You might be pleasantly surprised to find that prices have dropped in recent years. You might even price a 30-year level term policy and find it affordable.
If you have a "cash value" policy, such as universal life, it’s especially important to ask your agent (or contact the insurance company) for an "in-force ledger"—an estimate of how the cash in your policy is growing, and how long it will help subsidize your annual premium.
With these low interest rates, your policy may "run out" of money long before you run out of life! Then you could be hit with huge premium payments when you are older and can least afford it.
Homeowner’s Insurance Checkup
The market value of your home may have dropped—but not the cost of replacing the structure and contents. This is the perfect time to contact your agent and determine the true "replacement" cost of everything you own.
It’s also a good time to tour your house with a video or "flip cam" to record specifics, such as expensive woodwork or carpet. That will help you justify the replacement cost. Of course, you should keep the photos stored online or off premises, in case your home is destroyed by fire.
More expensive items such as art, silver, and jewelry must be "scheduled" separately to receive full coverage.
Tip: Ask about discounts, such as combining home and auto insurance. Or your policy may cost less if you are now a senior driver, or if your teen has moved out and gone to college.
And consider raising your deductible if you can afford it. That can also cut annual costs. Do this now, before winter storms hit and your agent gets busy!
NEXT: Evaluate Your Estate Plan|pagebreak|
Evaluate Your Estate Plan
This is the last thing you want to think about now—and it could be the most important. You never know when fate will deal an unexpected blow to your financial plans. And if you’ve made a mistake, you won’t be around to fix it.
Making an "estate plan"—a will and revocable living trust—doesn’t have to be an expensive proposition. But I suggest going to a professional to avoid issues after your death.
Fall is the perfect time to pull out that old plan and contact your attorney for an update. Your family situation may have changed in the intervening years. Surely, you don’t want money to go to an ex-spouse! And children may have grown, and have differing needs.
Before you skip this step, consider the consequences. I’m superstitious. I think that being unprepared is tempting fate!
Evaluate Your 401k Investments
I’ve saved this step for last, because it may be even more "painful" and tempting to avoid than dealing with your estate plan! But now—before year-end—is the time to make adjustments.
It’s tough to get advice on your 401(k)allocations, because brokers who are paid on commissions receive no payment for decisions on investments made inside your retirement plan.
Some employer plans do offer advice, through third-party advisors, such as Financial Engines or Morningstar. A new report by Financial Engines show the dramatic performance advantage for plan participants who get professional advice. A good part of that success comes from the discipline an advisor can bring to the process.
If your company does not offer this kind of advisory service, you can get a one-year free trial to Financial Engines, simply by clicking on the link at my home page at www.TerrySavage.com. Even if you try it just once, for a snapshot of their analysis, the insights will be helpful, I’m sure.
Fall is not the time to forget your money. It’s the perfect time to get organized. And that’s The Savage Truth!
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