An interim calculation in the computation of income tax liability. It is computed by subtracting certain allowable adjustments from gross income.
A person appointed by the court to settle an estate when there is no will.
The return from an investment after the effects of taxes have been taken into account.
Aggressive Growth Fund
A mutual fund whose primary investment objective is substantial capital gains. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Investments seeking to achieve higher returns also involve a higher degree of risk. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Alternative Minimum Tax
A method of calculating income tax that disallows certain deductions, credits, and exclusions. This was intended to ensure that individuals, trusts, and estates that benefit from tax preferences do not escape all federal income tax liability. People must calculate their taxes both ways and pay the greater of the two.
An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Annuity contracts are usually purchased from banks, credit unions, brokerage firms, or insurance companies. Any guarantees are contingent on the claims-paying ability of the issuing company.
Anything owned that has monetary value.
The process of repositioning assets in a portfolio to maximize potential return for a particular level of risk. This process is usually done using the historical performance of the asset classes within sophisticated mathematical models. Asset allocation does not guarantee against loss; it is a method used to help manage investment risk.
A category of investments with similar characteristics.
The examination of the accounting and financial documents of a firm by an objective professional. The audit is done to determine the records' accuracy, consistency, and conformity to legal and accounting principles.
Balanced Mutual Fund
A mutual fund whose objective is a balance of stocks and bonds. Balanced funds tend to be less volatile than stock-only funds. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
When the stock market appears to be declining overall, it is said to be a bear market.
A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, and so on.
Blue Chip Stock
The common stock of a company with a long history of profitability and consistent dividend payments.
A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. Bonds are usually issued in multiples of $1,000.
The net value of a company's assets, less its liabilities and the liquidation price of its preferred issues. The net asset value divided by the number of shares of common stock outstanding equals the book value per share, which may be higher or lower than the stock's market value.
When the stock market appears to be advancing overall, it is said to be a bull market.
A buy-sell agreement is an arrangement between two or more parties that obligates one party to buy the business and another party to sell the business upon the death, disability, or retirement of one of the owners.
Capital Gain or Loss
The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss.
Short-term investments, such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.
Cash Surrender Value
The amount that an insurance policyholder is entitled to receive when he or she discontinues coverage. Policyholders are usually able to borrow against the surrender value of a policy from the insurance company. Policy loans that are not repaid will reduce the policy's death benefit and cash value by the amount of any outstanding loan balance plus interest.
CERTIFIED FINANCIAL PLANNER® Practitioner
A credential granted by the Certified Financial Planner Board of Standards, Inc. (Denver, CO) to individuals who complete a comprehensive curriculum in financial planning and ethics.
CFP®, CERTIFIED FINANCIAL PLANNER® and federally registered CFP (with flame logo)® are certification marks owned by the Certified Financial Planner Board of Standards. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification.
Certified Public Accountant (CPA)
A professional license granted by a state board of accountancy to an individual who has passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled that state's educational and professional experience requirements for certification.
Charitable Lead Trust
A trust established for the benefit of a charitable organization. A grantor who places money, securities, property, and other assets in a charitable remainder trust can designate an income beneficiary, even if it is the grantor herself, to receive payment of a specified amount (at least annually) from the trust. You may also qualify for an income tax deduction on the estimated present value of the remainder interest that will eventually go to charity.
Charitable Remainder Trust
A trust established for the benefit of a charitable organization. A grantor who places money, securities, property, and other assets in a charitable remainder trust can designate an income beneficiary, even if it is the grantor herself, to receive payment of a specified amount (at least annually) from the trust. You may also qualify for an income tax deduction on the estimated present value of the remainder interest that will eventually go to charity.
Chartered Financial Consultant (ChFC)
A professional financial planning designation granted by The American College (Bryn Mawr, PA) to individuals who complete a comprehensive curriculum in financial planning. Prerequisites include passing a series of written examinations, meeting specified experience requirements and maintaining ethical standards. The curriculum encompasses wealth accumulation, risk management, income taxation, planning for retirement needs, investments, estate and succession planning.
Chartered Life Underwriter (CLU)
A professional designation granted by The American College to individuals who complete a comprehensive curriculum focused primarily on risk management. Prerequisites include passing a series of written examinations, meeting specified experience requirements, and maintaining ethical standards. The curriculum encompasses insurance and financial planning, income taxation, individual life insurance, life insurance law, estate and succession planning, and planning for business owners and professionals.
The Consolidated Omnibus Budget Reconciliation Act is a federal law requiring employers with more than 20 employees to offer terminated or retired employees the opportunity to continue their health insurance coverage for 18 months at the employee's expense. Coverage may be extended to the employee's dependents for 36 months in the case of divorce or death of the employee.
Coinsurance or Co-Payment
The amount an insured person must pay for a covered medical and/or dental expense if his or her insurance doesn't provide 100 percent coverage.
The generic term for goods such as grains, foodstuffs, livestock, oils, and metals which are traded on national exchanges. These exchanges deal in both "spot" trading (for current delivery) and "futures" trading (for delivery in future months).
A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and by capital gains or losses in the stock's share price.
State laws vary, but generally all property acquired during a marriage -- excluding property one spouse receives from a will, inheritance, or gift -- is considered community property, and each partner is entitled to one half. This includes debt accumulated. Nine states currently have community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (Alaska adopted a community property system in 1998, but it is optional.)
Interest that is computed on the principal and on the accrued interest. Compound interest may be computed continuously, daily, monthly, quarterly, semiannually, or annually.
Consumer Price Index
The U.S. Department of Labor's main indicator of inflation. The Consumer Price Index is calculated each month from the cost of some 400 retail items in urban areas throughout the United States.
An amount that can be subtracted from gross income, from a gross estate, or from a gift, thereby lowering the amount on which tax is assessed.
Defined Benefit Plan
A qualified retirement plan under which a retiring employee will receive a guaranteed retirement fund, usually payable in installments. Annual contributions may be made to the plan by the employer at the level needed to fund the benefit. The annual contributions are limited to a specified amount, indexed to inflation.
Defined Contribution Plan
A retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.
Investing in different companies, industries, or asset classes in an attempt to limit overall risk. Of course, diversification does not guarantee against loss; it is a method used to help manage investment risk. Diversification may also mean the participation of a large corporation in a wide range of business activities.
A pro rata portion of earnings usually distributed in cash by a corporation to its stockholders. In preferred stock, dividends are usually fixed; with common shares, dividends may vary with the fortunes of the company.
Dollar Cost Averaging
A system of investing in which the investor buys a fixed dollar amount of securities at regular intervals. The investor thus buys more shares when the price is low and fewer shares when the price rises, and the average cost per share is lower than the average price per share. Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of fluctuating prices. You should consider your financial ability to continue making purchases during periods of low and high price levels. However, this can be an effective way for investors to accumulate shares to help meet long-term goals.
Durable Power of Attorney for Finances (DPOA)
A durable attorney for finances (DPOA) enables you to authorize someone to act on your behalf in financial and legal matters. Your agent could pay everyday expenses, watch over your investments, and file taxes, among other tasks. A DPOA may become effective immediately or when a triggering event occurs, such as a doctor certifying that you are physically or mentally incapacitated.
Durable Power of Attorney for Health Care (HPOA)
A durable power of attorney for health care (HPOA), also known as a health-care proxy, enables you to appoint a representative to make medical decisions for you if you become unable to do so yourself. You can appoint anyone to be your agent as long as the individual is of legal age (usually 18 or older), and you can decide how much power your representative will have. An HPOA should be HIPAA compliant so your representative can access your private medical information.
A statistical result from the analysis of the risk and return for a given set of assets that indicates the balance of assets that may, under certain assumptions, achieve the best return for a given level of risk.
Employer-Sponsored Retirement Plan
A tax-favored retirement plan that is sponsored by an employer. Among the more common employer-sponsored retirement plans are 401(k) plans, 403(b) plans, simplified employee pension plans, and profit-sharing plans.
Enrolled Agent (EA)
An enrolled agent is a person who has passed the appropriate examination in order to represent taxpayers before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants, are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.
The value of a person's ownership in real property or securities; the market value of a property or business, less all claims and liens against it.
The Employee Retirement Income Security Act is a federal law covering all aspects of employee retirement plans. If employers provide plans, they must be adequately funded and provide for vesting, survivor's rights, and disclosures.
ESOP (employee stock ownership plan)
A defined contribution retirement plan in which company contributions must be invested primarily in qualifying employer securities.
Activities coordinated to provide for the orderly and cost-effective distribution of an individual's assets at the time of his or her death. Estate conservation often includes the use of wills and trusts.
Upon the death of a decedent, federal and state governments impose taxes on the value of the estate left to others (with limitations).
Executive Bonus Plan
The employer pays for a benefit that is owned by the executive. The bonus could take the form of cash, automobiles, life insurance, or other items of value to the executive.
A person named by the probate courts or the will to carry out the directions and requests of the decedent.
Federal Income Tax Bracket
The range of taxable income that is taxable at a certain rate. The brackets for tax years 2019 and 2020 are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.
Income from investments, such as CDs, Social Security benefits, pension benefits, some annuities, or most bonds, that is the same every month.
A defined contribution plan that may be established by a company for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 401(k) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59½.
A defined contribution plan that may be established by a nonprofit organization or school for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 403(b) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59½.
An approach to the stock market in which specific factors - such as the price-to-earnings ratio, yield, or return on equity - are used to determine what stock may be favorable for investment.
A federal tax levied on the transfer of property as a gift. This tax is paid by the donor. For 2019 and 2020, the first $15,000 a year from a donor to each recipient is excluded from tax. Most states also impose a gift tax. The gift tax exclusion is indexed for inflation.
A will entirely in the handwriting of the testator. Without witnesses, holographic wills are valid and enforceable only in some states.
Individual Retirement Account (IRA)
Contributions to a traditional IRA are deductible from earned income in the calculation of federal and state income taxes if the taxpayer meets certain requirements. The earnings accumulate tax deferred until withdrawn, and then the entire withdrawal is taxed as ordinary income. Individuals not eligible to make deductible contributions may make nondeductible contributions, the earnings on which would be tax deferred.
An increase in the price of products and services over time. The government's main measure of inflation is the Consumer Price Index.
A person who dies without leaving a valid will. State law then determines who inherits the property or serves as guardian for any minor children.
A broad class of assets with similar characteristics. The five investment categories include cash alternatives, fixed principal, equity, debt, and tangibles.
A trust that may not be modified or terminated by the trustor after its creation.
Joint and Survivor Annuity
Most pension plans must offer this form of pension plan payout that pays over the life of the retiree and his or her spouse after the retiree dies. The retiree and his or her spouse must specifically choose not to accept this payment form.
Co-ownership of property by two or more people in which the survivor(s) automatically assumes ownership of a decedent's interest.
Jointly Held Property
Property owned by two or more persons under joint tenancy, tenancy in common, or, in some states, community property.
Any claim against the assets of a person or corporation: accounts payable, wages, and salaries payable, dividends declared payable, accrued taxes payable, and fixed or long-term obligations such as mortgages, debentures, and bank loans.
Limited partnerships pool the money of investors to develop or purchase income-producing properties. When the partnership subsequently receives income from these properties, it passes the income on to its investors as dividend payments. Limited Partnerships are subject to special risks such as illiquidity and those risks inherent in the underlying investments. There are no assurances that the stated investment objectives will be reached. At redemption, the investor may receive back less than the original investment. Individuals must meet specific suitability standards. These standards, along with the risks and other information concerning the partnership, are set forth in the prospectus, which can be obtained from your financial professional. Please consider the investment objectives, risks, charges, and expenses carefully before investing. Be sure to read the prospectus carefully before deciding whether to invest.
How quickly and easily an asset or security can be converted into cash.
A trust created by a person during his or her lifetime.
A living will, which is another type of advance medical directive, can be used to outline which medical procedures you want to be used to prolong your life, typically in the event of a terminal illness. It generally does not become effective until you become incapacitated. Even if your state does not authorize a living will, you may still want one as a way to document your wishes.
The disbursement of the entire value of an employer-sponsored retirement plan, pension plan, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.
Marginal Tax Rate
The amount of tax paid on an additional dollar of income. As income rises, so does the tax rate.
A provision of the tax codes that allows all assets of a deceased spouse to pass to the surviving spouse free of estate taxes. This provision is also referred to as the "unlimited marital deduction." The marital deduction may not apply in the case of noncitizens.
Market Capitalization, or market cap, is the total value of the shares outstanding of a publicly traded company. It is calculated by multiplying a company’s number of shares outstanding by the current market price per share.
Money Market Fund
A mutual fund that specializes in investing in short-term securities and tries to maintain a constant net asset value of $1. Money-market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money when investing in a money market fund.
A debt security issued by municipalities. The income from municipal bonds is usually exempt from federal income taxes. It may also be exempt from state income taxes in the state in which the municipal bond is issued. Some municipal bond interest could be subject to the federal alternative minimum tax. If you sell a municipal bond at a profit, you could incur capital gains taxes. The principal value of bonds fluctuates with market conditions. Bonds sold prior to maturity may be worth more or less than their original cost.
Municipal Bond Fund
A mutual fund that specializes in investing in municipal bonds. Bond funds are subject to the same inflation, interest-rate, and credit risks associated with their underlying bonds. As interest rates rise, bond prices typically fall, which can adversely affect a bond fund's performance. The principal value of bond funds fluctuates with changes in market conditions. Shares, when sold or redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
A collection of stocks, bonds, or other securities purchased and managed by an investment company with funds from a group of investors. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares when sold, or redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Net Asset Value
The per-share value of a mutual fund's current holdings. The net asset value is calculated by dividing the net market value of the fund's assets by the number of outstanding shares.
Pooled Income Fund
A trust created by a charitable organization that combines the contributions of several donors and distributes income to those donors based on the earnings of the trust. The trust is managed by the charitable organization, and contributions are partially deductible for income tax purposes.
All the investments held by an individual or a mutual fund.
A class of stock with claim to a company's earnings, before payment can be made on the common stock, and that is usually entitled to priority over common stock if the company liquidates. Generally, preferred stocks pay dividends at a fixed rate.
A legal agreement arranged before marriage stating who owns property acquired before marriage and during marriage and how property will be divided in the event of divorce. ERISA benefits are not affected by prenuptial agreements.
Price/Earnings Ratio (P/E Ratio)
The market price of a stock divided by the company's annual earnings per share. Because the P/E ratio is a widely regarded yardstick for investors, it often appears with stock price quotations.
In a security, the principal is the amount of money that is invested, excluding earnings. In a debt instrument such as a bond, it is the face amount.
The court-supervised process in which a decedent's estate is settled and distributed.
An agreement under which employees share in the profits of their employer. The company makes annual contributions to the employees' accounts. These funds usually accumulate tax deferred until the employee retires or leaves the company.
A document provided by investment companies to prospective investors. The prospectus gives information needed by investors to make informed decisions prior to investing in a specific mutual fund, variable annuity, or variable universal life insurance. The prospectus includes information on the minimum investment amount, the investment company's objectives, past performance, risk level, sales charges, management fees, and any other expense information about the investment company, as well as a description of the services provided to investors in the investment company.
Qualified Domestic Relations Order (QDRO)
At the time of divorce, this order would be issued by a state domestic relations court and would require that an employee's ERISA retirement plan accrued benefits be divided between the employee and the spouse.
Qualified Retirement Plan
A pension, profit-sharing, or qualified savings plan that is established by an employer for the benefit of the employees. These plans must be established in conformity with IRS rules. Contributions accumulate tax deferred until withdrawn and are deductible to the employer as a current business expense.
A trust in which the creator reserves the right to modify or terminate the trust.
The chance that an investor will lose all or part of an investment.
Refers to the assumption that rational investors will choose the security with the least risk if they can maintain the same return. As the level of risk goes up, so must the expected return on the investment.
A method by which an individual can transfer the assets from one retirement program to another without the recognition of income for tax purposes. The requirements for a rollover depend on the type of program from which the distribution is made and the type of program receiving the distribution.
A nondeductible IRA that allows tax-free withdrawals when certain conditions are met. Income and contribution limits apply.
Evidence of an investment, either in direct ownership (as with stocks), creditorship (as with bonds), or indirect ownership (as with options).
Self-Employed Retirement Plans
In the past, the terms “Keogh plan” and “H.R. 10 plan” were used to distinguish a retirement plan established by a self-employed individual from a plan established by a corporation or other entity. However, self-employed retirement plans are now generally referred to by the name of the particular type of plan used, such as SEP IRA, SIMPLE 401(k), or self-employed 401(k). The contribution amount is indexed annually for inflation.
Simplified Employee Pension Plan (SEP)
A type of plan under which the employer contributes to an employee's IRA. Contributions may be made up to a certain limit and are immediately vested.
An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Generally used as a supplement to retirement income and pays over the life of one individual, usually the retiree, with no rights of payment to any survivor.
An arrangement under which two parties (usually a corporation and employee) share the cost of a life insurance policy and split the proceeds.
An IRA designed for a couple when one spouse has no earned income. The maximum combined contribution that can be made each year to an IRA and a spousal IRA is $12,000 or 100 percent of earned income (whichever is less) for the 2019 and 2020 tax years. The total may be split between the two IRAs as the couple wishes, provided that the contribution to either IRA does not exceed the maximum annual contribution limit ($6,000 for 2019 and 2020).
Tax credits, the most appealing type of tax deductions, are subtracted directly, dollar for dollar, from your income tax bill.
Interest, dividends, or capital gains that grow untaxed in certain accounts or plans until they are withdrawn.
Under certain conditions, the interest from bonds issued by states, cities, and certain other government agencies is exempt from federal income taxes. In many states, the interest from tax-exempt bonds will also be exempt from state and local income taxes. If you sell a tax-exempt bond at a profit, you could incur capital gains taxes. Some tax-exempt bond interest could be subject to the federal alternative minimum tax. The principal value of bonds fluctuates with market conditions. Bonds sold prior to maturity may be worth more or less than their original cost.
The amount of income used to compute tax liability. It is determined by subtracting adjustments, itemized deductions or the standard deduction, and personal exemptions from gross income.
An approach to investing in stocks in which a stock's past performance is mapped onto charts. These charts are examined to find familiar patterns to use as an indicator of the stock's future performance.
Tenancy in Common
A form of co-ownership. Upon the death of a co-owner, his or her interest passes to the designated beneficiaries and not to the surviving owner or owners.
Term life insurance provides a death benefit if the insured dies. Term insurance does not accumulate cash value and ends after a certain number of years or at a certain age.
A trust established by a will that takes effect upon death.
One who has made a will or who dies having left a will.
The total of all earnings from a given investment, including dividends, interest, and any capital gain.
A legal entity created by an individual in which one person or institution holds the right to manage property or assets for the benefit of someone else. Types of trusts include:
Testamentary Trust – A trust established by a will that takes effect upon death;
Living Trust – A trust created by a person during his or her lifetime;
Revocable Trust – A trust in which the creator reserves the right to modify or terminate the trust;
Irrevocable Trust – A trust that may not be modified or terminated by the trustor after its creation
An individual or institution appointed to administer a trust for its beneficiaries.
A method of transferring retirement plan assets from one employer's plan to another employer plan or to an IRA. One benefit of this method is that no federal income tax will be withheld by the trustee of the first plan.
Universal Life Insurance
A type of life insurance that combines a death benefit with a savings element that accumulates tax deferred at current interest rates, subject to change, but with a guaranteed minimum. Under a universal life insurance policy, the policyholder can increase or decrease his or her coverage, with limitations, without purchasing a new policy. Universal life is also referred to as "flexible premium" life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy's cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
Variable Universal Life Insurance
A type of life insurance that combines a death benefit with an investment element that accumulates tax deferred. The account value can be allocated into a variety of investment subaccounts. The investment return and principal value of the variable subaccounts will fluctuate; thus, the policy's account value, and possibly the death benefit, will be determined by the performance of the chosen subaccounts and is not guaranteed. Withdrawals may be subject to surrender charges and are taxable if the account owner withdraws more than his or her basis in the policy. Policy loans or withdrawals will reduce the policy's cash value and death benefit and may require additional premium payments to keep the policy in force. There may also be additional fees and charges associated with a VUL policy. Any guarantees are contingent on the claims-paying ability of the issuing company. Variable universal life is sold by prospectus. Please consider the investment objectives, risks, charges, expenses, and your need for death-benefit coverage carefully before investing. The prospectuses, which contains this and other information about the variable universal life policy and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
The range of price swings of a security or market over time.
Welfare Benefit Plan
An employee benefit plan that provides such benefits as medical, sickness, accident, disability, death, or unemployment benefits.
Whole Life Insurance
A type of life insurance that offers a death benefit and also accumulates cash value tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as "ordinary" or "straight" life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy's cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
A legal document that declares a person's wishes concerning the disposition of property, the guardianship of his or her children, and the administration of the estate after his or her death.
Generally, the yield is the amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation.
This type of bond makes no periodic interest payments but instead is sold at a steep discount from its face value. Because these bonds do not pay interest until maturity, their prices tend to be more volatile than bonds that pay interest regularly. Interest income is subject to ordinary income tax each year, even though the investor does not receive any income payments. Bonds sold prior to maturity may be worth more or less than their original cost.
Carol Scatolini, CFP®, Wealth Manager
President, Scatolini Wealth Management
Carol Scatolini CFP® is a Wealth Manager and President of Scatolini Wealth Management. Since 1995 Carol has helped clients address their financial concerns and develop strategies by focusing on each individual’s specific needs. With extensive experience throughout major shifts in the markets, Carol has dedicated her career to delivering the personalized investment planning services her clients deserve. Carol began her career as a Financial Advisor with Merrill Lynch in Worcester where she developed her fundamental investment knowledge. In 2003, she earned the CFP® certification by completing an approved educational program, passing a rigorous examination and meeting stringent experience requirements. In 2006 she relocated to the Springfield, MA location and remained there until 2011 when she established her independent company, Scatolini Wealth Management located at Post Office Park in Wilbraham, MA.
Carol focuses on helping clients with all their complex and major life events such as retirement, divorce settlement, inheritance, and estate planning strategies. Each client receives personalized financial advice as well as a custom financial strategy tailored to their unique situation. Special attention is given to diversification, asset allocation and risk management. Over the years Carol has worked with a cross section of clients including young and mature families, clients with significant inherited and earned wealth, business owners with specific needs and charitable organizations and foundations. She also has focused on helping women investors develop their financial acumen and confidence through her investment planning process.
Teresa D. Chaves is a Registered Client Service Associate who joined Scatolini Wealth Management in 2014. She is responsible for the day to day operations and handles all client needs including trades, account opening and processing all required paperwork. She comes with over 20 years of banking experience prior to transitioning to the brokerage/financial services industry in 2000. Prior to working at Scatolini Wealth Management Terry worked as a client associate at Bank of America Investment Services and Commonwealth Financial Network. Terry holds a Series 7 registration as well as being a notary public. She is fluent in continental Portugese and brings not only excellent customer service skills, but experience in accounting, auditing and overall front office support to Carol. In her spare time Terry likes to garden, dance and enjoys wine making as well. She loves to spend time with her family, especially her adorable grandchildren. Terry resides in Ludlow with her husband.
Instead of simply investing toward a dollar amount for a retirement target, we use a process called Envision®. This process can help you uncover your goals, determine which are the most (and least) important and track your progress in reaching them. Our approach includes:
An exploration of your unique goals and dreams
An investment plan built to support your needs and goals
Monitoring to keep you on track
Flexibility to update your plan to reflect life or market changes
Easy to follow reports and updates
The Envision® process is a great way to start creating your own personal roadmap. It also gives you the flexibility to alter your plan to account for changes in your life. For more information on this process, give us a call today.
How Strategies are designed to help you retire with confidence
Our approach to retirement income planning begins with the development of a structured plan that outlines specific strategies to address your goals and objectives, concerns, and timeline. Together, we can determine a fully diversified retirement income strategy compatible with your individual situation.
Understanding your retirement income needs
For many years, you may have pursued an investment strategy emphasizing growth to help build retirement assets. However, once retired, you need to balance your need for income with growth to ensure your portfolio is buffered against market volatility and keeps pace with inflation. This makes it critical to re-evaluate your risk tolerance and preferences to help ensure both your investment strategy and spending plan are aligned with your retirement lifestyle needs and goals.
How long will your assets last? Consider your withdrawal rate.
For most individuals, an essential part of retirement income planning is determining an appropriate withdrawal or spending strategy. What is the appropriate withdrawal rate for you—4%? 5%? 6%? By establishing a withdrawal rate that’s too high, you could deplete your savings too quickly and potentially outlive your money. And, once you’re retired, it’s important to review your retirement income plan whenever your circumstances or the markets significantly change, but at least annually, so you can adjust your spending strategy and withdrawal rate as needed. In addition, keeping the rest of your portfolio invested and diversified gives it the potential to continue growing.
Asset allocation and diversification are essential components during your years of saving for retirement. How you allocate your assets across various asset classes during this accumulation phase can have a profound impact on the savings you have upon entering retirement. However, once in retirement, the focus will likely be to include an allocation designed to meet specific income objectives, including asset protection, growth, and guaranteed income. If you want to learn more about our retirement strategies schedule a consultation with us today.
To succeed in today’s complex markets, you need objective advice that you can rely on. Sometimes the best advice is to hold steady and maintain your investments. Other times, the best advice is to take immediate action. Above all you need advice you can trust. Most people do not have the time or the resources to perform the necessary due diligence and analysis on the investments for their portfolio or perform the necessary analysis to build a portfolio in the first place. Individual investors may not be aware of, or follow, good investment disciplines, which may result in lower returns.
We utilize numerous investment programs to help you meet your investment goals, whether you are seeking a long term asset allocation portfolio, have a need for income, or want to meet another specific goal. We offer asset allocation models from conservative to long term for investors seeking income, growth and income or growth. Our models include mutual funds, ETF’s, stocks and bonds.
We believe each client deserves specialized investment advice. We spend considerable time preparing and developing individualized investment strategies. We are careful to consider all factors relevant to investment decisions-risk/reward levels, life-stage planning, estate strategies and others. We are committed to designing customized and innovative ways to better serve you. To learn more about our investment portfolios schedule an individual consultation with us today
Clarify your objectives
While there are many reasons to invest the three most commonly cited reasons are to:
Help ensure a financially secure retirement
Pay a child’s or grandchild’s higher education expenses
Leave a financial legacy for heirs or, perhaps, a favorite charity
We discuss your objectives and then help you prioritize them. For example, you may want to save for retirement. But how do you plan to spend your retirement? Playing golf or tennis? Traveling? Shopping? Enjoying time with children or grandchildren? Pursuing a second career? Volunteering for your favorite charities? These are all issues to consider when defining your objectives.
Determine your time horizon
Knowing your time horizon is important because it will help dictate the types of investments you should make. Having a longer time horizon usually means you can invest more aggressively because you should be able to ride out any short-term price volatility and have the potential to enjoy the increased returns that a riskier investment usually offers.
Assess your Risk Tolerance
We determine your risk tolerance to see how much risk you can comfortably live with in your portfolio. Although higher returns may be attractive, you may be comfortable with a relatively low level of risk. Once we identify your risk tolerance we can design your portfolio to fit within it, which may require you to adjust your objectives or time horizon.
Establish your starting point
Once you’ve clarified your objectives and time horizon, you need to determine where you are today. In other words, is your financial house currently in order? For example, if you’re carrying a heavy debt burden, especially high-interest credit-card debt, you’ll probably need to reduce it before you start investing.
Developing Your Portfolio Strategy
One of the keys to successful investing is constructing a portfolio with the right investment mix, or asset allocation to help you work toward your objectives. It all starts with having a solid investment plan that takes into consideration what is happening now, what could happen next and what may happen even later. Having a proper asset allocation is a time-tested strategy that lets you “be in every lane” when it comes to managing your portfolio. Because no one knows for sure which investment is going to do well tomorrow, we create portfolios that spread your money over a number of different types of investments. That way you can be prepared for just about anything.
The Value of Advice
Following a disciplined investment process and working with a financial advisor can give you confidence that your investment portfolio is suitable for you based on your investment goals, time frame and risk tolerance and that, with regular monitoring, you remain invested to meet those investment goals. We treat each client as an individual and provide quality services and investment choices. Our portfolio recommendations are customized for you-they are not boiler plate solutions. We provide information that is clear, understandable and focused on helping you reach your long term financial objectives.
Keys to a Successful Relationship
Our objective is to help clients succeed financially and work toward their life goals. Whether you’re in the early stages of building wealth or facing complex retirement- or estate-planning choices later in life, we’re ready and equipped to help you make decisions for your future. We all have unique goals in life and want to feel confident that we’re on track to meeting them. In that effort, it helps to have a financial roadmap to keep us on track – especially given the twists and turns that inevitably lie ahead.
What You Can Expect From Us:
You can trust that we will consistently and responsibly perform all requested services and that we will be available when you need us.
Treat you with respect, honesty and dignity
Act as your advisor, putting your interests first
Strive to acquire a complete and accurate understanding of your goals, your tolerance for investment risk and your timeframe
Explain the implications of the strategies we propose
Update you by email, mail and phone
Meet with you regularly to review your Financial Strategy Action Plan