Cash Flow Planning

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Pros and Cons of Qualified Longevity Annuity Contracts

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Contributed by: Matt Trujillo, CFP® Matt Trujillo

A recent IRS ruling made it possible to defer 25% or $125,000 of your 401(k) and/or IRA assets into a qualified longevity annuity contracts or QLAC.  Our financial planning department here at The Center decided to explore these in greater detail to see what, if any, merits these products might have in clients’ overall financial plans.

QLAC Option 1

To start there are two main types of these QLACs. In the first, you give your money to an insurance company in exchange for substantial future payments (usually beginning at age 85). In return, the life insurance carrier gets to keep the full initial premium in the event that you pass away prior to benefits starting. This is an insurance product like auto and home-owners insurance in the sense that if you don’t use it, you lose it.  Due to this forfeiture of initial premium, this product has not been widely adopted.

QLAC Option 2

So, in order to make the product more marketable, insurance companies have recently come out with a second type of product that guarantees a return of your initial premium. However, this too has drawbacks because you are giving up any potential growth you might have had on the money prior to benefit payments commencing. Also, when benefits do finally commence, the payout is not quite as high as the first product because the insurance carrier is on the hook to return 100% of the initial premium.

Consider the Drawbacks

Essentially the drawbacks of QLACs can be summed up quite easily. If you purchase one and you die prior to benefits commencing, then you made a bad deal. However, if you purchase one and do live at least 5 years past the commencement of benefits, you rapidly recover the entire initial premium and start to draw more than you initially paid.  

Just like the name of the product suggests, these seem to only make sense as a hedge against living an above average life expectancy. If longevity risk is something that concerns you, we encourage you to speak with a professional to understand what methods can be taken to give your plan the greatest probability of success!

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. You should discuss any tax matters with the appropriate professional. Guarantees are based on the claims paying ability of the issuing company.

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Playing Catch-Up with Retirement Planning

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Contributed by: Matt Trujillo, CFP® Matt Trujillo

What happens if you don’t start saving for retirement in your 20s or 30s? Recently I’ve had a few initial meetings with potential clients who have, for various reasons, had to delay their retirement planning until later in life (i.e. late 40s to mid-50s).  In many cases I heard things like, “Will I ever retire?” and, “Should I even bother trying?” I tell them: Where there’s a will there’s a way.

Here are 4 things you should be doing if you are trying to play catch-up with retirement planning.

  1. Save a lot of money: This almost goes without saying.  If you have nothing or very little saved for retirement, then you are likely going to need to save at least 20-25% of your income to catch up, depending on your time horizon before retirement. 

  2. Consider taking more risk than your peers: Typically people in their mid-50s who have been saving for retirement for many years, don’t need to take significant risks in their portfolio to meet their retirement income goals. Often times a balanced 60% stock and 40% bond portfolio can generate sufficient risk adjusted returns. However, if your nest egg is small, then you may not have the luxury of having this type of portfolio. If you’re playing catch-up, you may consider allocating more of your capital to diversified stocks.

  3. Get a handle on cash flow: Nobody likes budgeting, but if you are going to save the percentage of income necessary to catch up, then you will need to have a good base level of understanding of where your money is going on a monthly basis.

  4. Put a plan in place: Get a written financial plan so you know what you need to be doing to get on the right track! Also, consider working with someone who will keep you accountable in terms of saving money.

These recent conversations with clients have ended with a reassuring message from me: Don’t lose heart! Everyone has to start somewhere!

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo, CFP® and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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Part 6: A Year of Lessons on Money Matters for your Children and Grandchildren

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Contributed by: Matthew E. Chope, CFP® Matt Chope

When it comes to keeping track of finances, my advice for the young is to keep it simple and straightforward and get qualified help if needed. That starts by finding a way to track your money without making it an obsession. Begin by tracking your finances at least once a month.  To do this, simply add up what’s coming in and then look at where it’s going. Once you’ve established that you are indeed living within your means, it is time to establish two kinds of savings accounts that you contribute to each month:

1. Build a “Save to Spend” account

2. Build a long-term financial security account (i.e. 401k or IRA)    

The Save to Spend account is where you park money for the short term to be spent on things that lead you toward the 100 things you want to accomplish in life (read this blog if you don’t have your 100 things list yet).  The long-term security account is for financial independence, which will eventually allow you to work because you want to not because you have to.

Investing does not need to be overly complicated either. For some good reading to help you build knowledge about investing, here are a few books I recommend:

Once you understand the basic principles -- like diversification, pay yourself first, don’t miss a match, maximizing deductions and credits, and dollar costs averaging -- and if you have the interest to follow those principles, then do it on your own but keep it simple.  Remember to review my previous blog about using time to your advantage (start early – start now!). It might make sense though, to consider getting qualified help managing your money, especially if this is something you’re not interested in doing. If you’re looking for help, here are 7 key components to help you find the right person.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matthew Chope, CFP® and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss.

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Gas Prices Went Down But Where Did the Money Go?

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Contributed by: Angela Palacios, CFP® Angela Palacios

After oil and thus gas prices sharply declined late in 2014, many were expecting consumers to run right out and spend what they’d saved.  What has surpised everyone is that isn’t happening.  The chart below shows the direct correlation between the decrease in what consumers are spending at the pump (the light blue line) and the increase in their savings account dollars (the dark blue line).  As consumers are spending less, they are saving more.

There are a number of reasons contributing to these increased savings rather than spending:

  • Most did not expect the temporary reprieve in gas prices to last

  • Prices of many other goods are perceived to be increasing

  • People are starting to recognize the importance of having a few months of living expenses set aside in the bank as a safety cushion

While all of these are probably contributing factors causing this “savings” to not be spent, I would hope the main reason for the pattern is the last bullet point -- people recognizing the importance of having some money set aside for a rainy day!

Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Angela Palacios, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

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Health Care Dollars and Aging

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Contributed by: Sandra Adams, CFP® Sandy Adams

I ran across an interesting article recently by Howard Gleckman, author of the book "Caring for our Parents." The article “How we Spend Our Health Care Dollars As We Age” discussed current trends in health care spending for seniors and affirmed for me some of the key issues we discuss with clients regarding health care spending and aging in retirement.

Spending on Health Care Changes with Age

The article referenced recent research by the Employee Benefit Research Institute indicating that out-of-pocket spending for routine health care changes very little after age 65, and remains relatively unchanged even after age 85 for these routine expenses (trips to the doctor or dentist, medications, etc.). That’s mainly because Medicare covers the bulk of those expenses. The story changes dramatically when it comes to very high cost medical procedures/care or long-term support or services. As we age, we are far more likely to need these high cost services (about 27% of those age 65 - 74 had an overnight stay in the hospital during the period of 2010 - 2012, while more than 42% of those 85 and over spent at least one night a hospital during that same period). The key here is this: Medicare is the primary source of health insurance for those over the age of 65. MEDICARE IS NOT LONG TERM CARE INSURANCE.

How to Plan for Potential Health Care Expenses

According to a study by the Kaiser Family Foundation, out-of-pocket costs alone for someone spending two years in a nursing facility can run $24,000 - $67,000. If you do need skilled care for a period of time for either rehabilitation or long term care, the costs can be devastating to your finances. So what do you do to plan ahead for these potential costs?

  1. Discuss options with your financial planner for long term care insurance. There are ways to purchase policies as part of employer groups and associations or individually. There are also new hybrid life/long term care or annuity/long term care policies that may fit well in your overall financial plan.

  2. Discuss options with your financial planner to self-insure the costs for potential health/long term care costs using existing assets. You can earmark specific assets or income streams for those potential future costs in a way that least disrupts your overall financial plan.

  3. Discuss with your financial planner any possible future government benefits that you may be eligible for that might help to cover any future long-term care costs (i.e. Veteran's Aid & Attendance Benefits). Determine if you may be eligible and put the proper financial and legal planning in place for future eligibility when and if needed.

As always, planning now for the future what if's is always better than planning in a crisis. Have a conversation about your future health care and long-term care planning with your financial planner at your upcoming financial review.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandra Adams, CFP ® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Long Term Care Insurance may not be suitable for all investors. Please consult with a licensed financial professional when considering your insurance options.

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How to Know if It’s Time to Refinance Your Home

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

FIVE years ago we all heard that, “Interest rates won’t be this low for long!” Maybe someone told you to, “Hurry now!” to purchase or re-finance a home?  Well, fast forward to 2015 and 30 year mortgages are hovering at about 4% depending on your credit score, slightly lower than what there were back in early 2010.  It’s pretty incredible to think how long we’ve had such a favorable interest rate environment for homeowners.  Rates have come down even more since the beginning of this year and we’re hearing about the drop more and more in the media.  If you’re thinking about re-financing your home, below are a few items to consider before going through the process:

How long will you be in the home if you’re planning on re-financing? 

Sure, lowering your rate is great, but will you be in the home long enough for the interest savings to justify the closing costs of the loan (typically around $2,000 – $3,000)?  The typical rule of thumb is about 3 years, so if you plan on moving a year after you re-finance, it most likely makes sense not to make any changes.  

Just like investing – don’t try to “time” interest rate changes

Rates can fluctuate dramatically in a short period of time. Over the last few years we have seen a great deal of volatility in mortgage rates.  I believe a 30 year mortgage around 4% is a phenomenal borrowing rate, don’t get greedy and try to hold out to save .25% because you think you know what direction rates are going.  We’ve seen this happen before and rates have increased and clients have missed opportunities to lock in historically low mortgage rates.   

Consider combining into one mortgage

Many folks have two mortgages on their home.  The primary is typically the initial mortgage they took out when they bought the house and the second is often times a home equity loan or home equity line of credit.  I recently met with a couple who was paying almost 5% for their primary loan amount and almost 7% for the home equity loan!  My eyes got big when I saw these figures because I knew immediately this was a planning opportunity for them. They had no plans to move in the near future.  The couple was able to re-finance into one, fixed rate mortgage and they should save thousands in interest. Plus they should pay their home off about 3 years sooner than they would have with their prior mortgages.    

Think you’re still “underwater”?  Think again…

Coming out of the recession, many homeowners were unable to re-finance because their home was “underwater” – meaning what they owed exceeded their value.  Although there were some federal programs that helped these types of individuals, not everyone fit the mold depending on loan guidelines. Some folks are just now seeing their home values exceed their loan balances.  Home prices have risen quite a bit in most areas and you might be surprised at what your home is actually valued at now.  Don’t just assume you can’t re-finance because of your perceived loan to value ratio.  Reach out to your loan provider and get their take and see what your options are.

We always encourage clients to keep us in the loop when deciding to go through with a refinance.  We can be the second set of eyes to make sure, first and foremost, that your needs are being put first and that your personal situation and goals are taken into account when making these big financial decisions.  Please don’t ever hesitate to reach out to us if you’d like to run the numbers past us! 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s Money Centered and Center Connections blogs.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. You should discuss any tax or legal matters with the appropriate professional.

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3 Steps for Coping with Financial Roadblocks

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Going through a divorce or changing jobs can put your life in a spin. That wasn’t in your plan, so what’s next? Getting financial facts together, especially during a significant change in life, can easily get shifted to the back burner. I see these kinds of life events as potential financial roadblocks.  When you begin navigating through a financial roadblock, all of the answers may not be clear upfront.

Undoubtedly there are options and trade-offs involved.   People worry that they lack knowledge on financial topics.  If you find yourself in a position where financial planning in that moment seems overwhelming, intimidating, or you are just plain fearful of making a mistake, I recommend starting with these three steps to simplify, organize, focus and ultimately overcome your financial roadblock:

  1. Create a realistic post-financial change budget.  This could be post-retirement, post-divorce or post-career change.  Maybe you haven’t paid enough attention to what you are spending or saving. You need to take into consideration a change in income. This fundamental step will help you understand what you can or need to do.

  2. Invest in yourself by putting together a snapshot of your financial health.  This is accomplished with a personal net worth statement. The formula to use is:  Assets – liabilities = net worth.  There are a number of reasons why preparing a net worth statement is a good move.  It gives you a one page reality check to use as a planning tool, you can check progress toward financial objectives and it can help you identify potential red flags like an emergency fund that has dipped too low or debt that is rising faster than anticipated.

  3. Address financial decisions proactively.  Instead of guessing or letting things roll along, begin by thinking about financial goals and obligations on a timeline.  This can be as simple as prioritizing in 3 buckets.  What do I have to do now (immediate action)? What can be tackled soon (big picture prep steps)? And what can be done later (accomplished after the priorities are under control)?

You may not know all of the answers today, but this exercise will at least help simplify, organize, and address the financial issues that are weighing on your mind. If you need help navigating through a financial change due to divorce or a career move don’t hesitate to call or email me.    

 

 

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Laurie Renchik and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. 

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

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Boomerang Drain: Can an Adult Child Derail your own Financial Goals?

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Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

You’ve raised your children, launched them out into the world, and cut the purse strings, right? For many of us, the answer is no. Financially caring for those that left the nest but not the wallet is a sensitive subject, but a real one when it comes to planning for your own retirement. The National Center for Policy Analysis reports that more than half of parents of 18 to 39 year olds are providing some support:

59% of baby boomer parents financially support their adult children, often paying living expenses, medical bills and student loans.

For most of us, there is a relatively set amount of money/cash flow to work with.  If we spend more on financial support for adult children, this leaves less for other areas such as travel and/or saving. This is not making a judgment if such support is right or wrong. It is just math. 

Tactics for Setting Goals and Boundaries

If you find yourself wanting to provide financial support, consider setting both goals and boundaries.  Ask yourself these questions:

  1. What expenses are you willing to contribute?

  2. How long do you want to contribute? 

  3. What are the expectations of your child?

In the past, I have worked with clients that have decided to provide financial support to their “boomerang” child.  They were glad that they were in the financial position to do so and acknowledged that some of their own plans were being put on hold because of their choice.  The parents set a 2-year window for their child, a son in this case, and laid out their expectations. It looked something like this:

  • They decided they were willing to pay for their adult child’s rent and car for 3 months at 100%

  • The next three months they covered 50% of the rent

  •  After that, the child was fully responsible for the payment

 The plan worked out well for all of them and now mom and dad are back to enjoying the empty nest years.

More Retirement Goal Drains

Boomerang drain is just one of the pitfalls or obstacles to avoid if you want your empty nest years feel like being, “In college, only with money.” Many of us simply don’t make the time to plan what we want your empty nest years to be (here are my tips on that). Another obstacle can be debt, which doesn’t have to be a four-letter word.  Managing the use of credit is an important component to building and maintaining wealth and having flexible cash flow to accommodate travel or ramping up your savings for retirement. For more strategies on managing debt, click here.

When it comes to reaching retirement goals, I’m a where there’s a will, there’s a way kind of person. Is the glass half full or half empty? I prefer it filled to the rim with a napkin underneath to catch any potential drips. We all face challenges in retirement planning. The important part is overcoming those challenges by filling that glass to overflowing … and I’ve seen many clients do it over the years. If you are an empty nester facing any of these potential drains on your goals, talk to your financial planner. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Timothy Wyman, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

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5 Ways to Locate Lost Assets

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Contributed by: Sandra Adams, CFP® Sandy Adams

Working for a firm that has been serving clients for 30 years, it is not surprising that we are often in the position of helping to settle estates, either for existing clients or their relatives. Aside from assets that are known, an important step in the process is to search for assets that might not have been documented, or assets that the deceased was unaware of. Here, I share some very useful resources that can be used to search out missing life insurance policies, unclaimed assets, or money due:

USA.GOV - the site provides links to various resources to search out unclaimed assets by state, lost pensions, unclaimed tax refunds, settlements for closed banks and credit unions, money due from mortgage transactions, savings bonds and more.

Michigan Money Quest - The Michigan Department of Treasury's site for unclaimed property.

NAUPA/MissingMoney.com - The National Association of Unclaimed Property Administrators.

NAIC - The National Association of Insurance Commissioners orphaned life insurance policy search.

MIB Solutions - Lost life insurance policy locator service.

If you are the executor of an estate or think you might be the beneficiary of a lost insurance policy or asset left by a loved one, consider searching these sites.

To ensure that you don't leave any "lost" assets for your heirs, search these sites during your lifetime and do your best to document all of your assets, income sources, and advisors using our Personal Record Keeping document.  And make sure your financial planner is aware of your full financial picture so that he or she can quarterback the estate settlement process when the time comes.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. You should discuss any legal matters with the appropriate professional.

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What to Consider Before You Buy a Second Home

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Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

Well it’s that time of year again.  No not the cold and flu season – well actually it’s that time too.  Rather, I am talking about the time of year where my wife and I go up north for a few days and after a fantastic 24 hours have the conversation.  You know, should we buy our own vacation home/condo rather than mooch off our friends (hey they are good friends)? It’s a question that many of my Empty and Soon-to-be-Empty Nester clients ask.

First Steps to a Second Home

Our friends, we will call them John & Michelle to protect their identity, decided a few years ago to purchase a condo in God’s Country (that’s northern Michigan….not way up North).   So far the purchase has worked out well and I think they did a few things right.  They actually bought the condo with another family as they knew neither of them would use the condo fully on their own.  They spelled out their “parenting” time or who had first right of refusal for each Holiday.  And last but not least, they formed a Limited Liability Company (LLC) to own the property in order to shield other personal assets from potential liability. All in all, the purchase has been wonderful for us…..er I mean them.

Consider the “Carrying” Costs

For a short period of time a second home or vacation home sounds like a wonderful idea to us (wine is involved in many instances).  However, after a few minutes we decide that it is not for us.  Although interest rates are low, making the cost more manageable, we have some other financial priorities at this time.  Also, many folks do not fully consider, or fully appreciate, the “carrying” costs of owning a second home.  The real or total cost of owning a second home is much more than principal & interest payments.  Additional costs can include:

  • Property taxes

  • Association dues

  • Utilities

  • Insurance

  • Repairs & maintenance (necessary year round, whether or not you’re there)

Additionally, simply furnishing and updating two homes is no cheap undertaking. For now, we are content renting for the couple of times that we make it up north. 

3 Factors in Buying a Second Home

That said, I wouldn’t be surprised if we decide to make a second home purchase in the future – for lifestyle purposes rather than investment.  And if we do, we’ll make the following a part of our decision-making process:

  • Use: Do we expect to use it more than just a couple of weeks? If so then buying may make sense.

  • Location: What area makes sense now and in the future? Are we willing to drive X hours?

  • Price: What price point will still allow us to fund retirement savings? What are the ongoing expenses?

Adding a second home can have wonderful lifestyle benefits.  Many a family has built cherished memories thanks to the family cottage.  Make sure you weigh the full cost of owning a second home with the desired lifestyle benefits.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James.

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