Finances in Focus


Valentine’s Day is upon us. And while it’s certainly fun to give and receive chocolates and roses, why not go a little deeper this year? Specifically, if you are married, consider using this commemoration of love as a starting point for taking care of your spouse in the future — even if you’re not part of it.

Actually, both you and your spouse could designate Valentine’s Day as the beginning of your joint efforts to provide financial security for the surviving spouse when one of you is gone.

Your strategy should involve at least these three key elements:

—Understanding your household’s finances. In some marriages, one spouse handles all the household financial matters, including investments. If this person were to pass away first, it could leave the surviving spouse with the dual responsibility of managing day-to-day finances and tracking down all investment information. These tasks could be overwhelming to someone who is unprepared to deal with them, so you’ll want to take steps to ensure you and your spouse are aware of your joint financial picture.

For starters, keep good records of all your financial assets, including investment accounts, life insurance policies and legal documents — and make sure both of you know where these records are kept. Also, if you use the services of a financial professional, it’s a good idea for you and your spouse to meet regularly with this individual to ensure both of you know where your money is being invested and how close you are to achieving your financial goals.

—Creating a future income plan. You and your significant other should discuss your sources of income and identify which ones are specifically tied to each spouse and may be affected by a death. These include things such as pensions and Social Security benefits. You’ll also want to talk about options to boost future income upon the death of a spouse.

Do you have adequate (or any?) life insurance? Have you considered investments that can be structured to provide a lifetime income stream? Have you thought about having the higher-earning spouse delay taking Social Security to maximize the survivor benefit for the surviving partner? These are the types of questions you’ll want to answer as you think about providing adequate income for the partner who outlives the other.

—Leaving a legacy. If you and your husband or wife haven’t already done so, take this opportunity to discuss your estate plans. For example, you may want to talk about the need to consult with a legal advisor to determine if you, as a couple, could benefit from setting up some type of trust arrangement. You should also discuss how, when the time comes, you want to handle any retirement assets, such as IRAs, that were titled in the deceased spouse’s name.

Do you both want the assets to immediately roll over to the surviving spouse or should you name your children, parents or others as beneficiaries? Estate considerations can be complex and involve many different aspects of your financial resources. So you and your other half need to be “on the same page” with your desires and goals.

Valentine’s Day will come and go quickly. But if you use the occasion to start having the types of discussions described above, you can create something that will last a lot longer than candy or flowers — especially in these days and times, when many of the issues which only used to face the straight community now equally effect us all, as it should be.

On another topic, as you’ve no doubt noticed, your trips to the gas station have been a lot more pleasant these past several months. There’s not much doubt that low oil prices have been welcome to you as a driver. But when oil is cheap, is that good for you as an investor?

There’s no clear-cut answer. But consider the following effects of low oil prices:

Positive impact on economy — When you spend less at the gas pump, relative to recent years, what will you do with your savings? Like most people, you’ll probably spend most of it on goods and services. If you multiply the amount of your increased spending by the millions of other Americans who are also saving money on gas, you can see that you and your fellow consumers are likely adding billions of dollars to the economy. Typically, a strong economy is also good for the financial markets — and for the people who invest in them.

Different results for different sectors — Different sectors within the financial markets may respond in different ways to low oil prices, even if the overall effect is generally positive. For example, businesses such as consumer goods companies and auto manufacturers may respond favorably to cheaper oil and gas. But the picture might be quite a bit different for energy companies.

You could spend a lot of time and effort trying to adjust your investment portfolio in response to low oil prices. In fact, you may well want to consult with your financial professional to determine which moves might make sense for your individual situation.

Yet there’s actually a bigger lesson to be learned here: Don’t overreact to temporary developments. The recent decline in oil prices has certainly had an economic impact, but no one can predict how long these prices will stay low or what other factors may arise that would affect the financial markets. That’s why you can’t reconfigure your portfolio based on particular events, whatever they may be — oil price drops, interest-rate fluctuations, political squabbles at home, natural disasters in faraway lands and so on.

If you can keep from being overly influenced by specific events, you may be able to gain at least two key benefits:

—First, by not making trades constantly in reaction to the headlines of the day, you can avoid piling up heavy fees and commissions —costs that can reduce the return rate on your investments.

—Second, you’ll find that if you aren’t always thinking about what’s going on in the world today, you can focus your investment efforts more intensely on where you want to be tomorrow. The most successful investors set long-term goals and don’t focus on factors they cannot control, such as oil prices, interest-rate changes or other economic events. Instead, these investors make adjustments, as necessary, to accommodate changes in their goals as well as other changes, such as revisions in tax laws — but they basically stick to their same approach for the long term.

So be aware of low oil prices, but don’t get so “pumped” about them that you sludge up your consistent investment strategy — because that strategy has the energy to keep you moving toward your important objectives.

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