Your Aging Parents and Their Finances

Some of you who read the title of this post can already feel the sweat breaking out on your forehead; for many of us, the thought of asking our parents about their finances is a daunting prospect. After all, these are the people who raised us, who guided us into adulthood; what gives us the right to think we need to know about their financial plans? We also fear that they might think we’re just trying to see how much we’ll get upon their demise, or, even worse, that we’re trying to get control of their finances right now.

Certainly, discussing financial matters with aging parents can make for some tense moments. On the other hand, it’s important for those who might be in the position of needing to settle their parents’ estate to have enough information to proceed efficiently and in accordance with the parents’ wishes.

If you are facing “the talk” with one or both older parents, clearly state up front that they are loved, valued, and respected. Thus, it is vital that their wishes be honored, including their intentions for their estate. While none of us want to face the loss of one or both parents, it is also a fact that the more we know in advance about our parents’ desired final arrangements, the smoother the process will go, and the lower the stress level will be, especially in a time when emotions will already be running high.

Here are the main things you need to know:

  • Whether there is a will or a trust, and if so, where the documents are kept;
  • Whether there are any advance medical directives in place, and if so, where the documents are kept;
  • Who the parents’ principal legal, financial, health, and other advisors are, along with their contact information;
  • The location of any safe deposit boxes, as well as the keys to the boxes;
  • Amount and beneficiaries of all life insurance policies, as well as the names of the issuing companies and the locations of the policy documents.

Depending on the specific situation, you might want to ask a few additional questions:

  • Are your beneficiary designations up to date? Have there been any changes in your or your children’s marital, health, or other situations that have not been taken into consideration? Have any grandchildren come into the family that you want to include in these documents?
  • Where are your retirement accounts, checking accounts, savings accounts, or other investment accounts? Whom should be called in order to get information about these accounts? If any of these accounts have beneficiaries designated, are the designations up to date?
  •  Do you have a financial and/or medical power of attorney? If you do, who have you designated as your agent?
  • Where are your tax files, and who prepares your taxes?

A great online resource for adult children who are wondering how to talk to their aging parents about their finances is available at The name comes from the point in life that many experts believe is the optimal time to have “the talk”: when you are 40 and your parents are 70. The website has some great, research-based tips and ideas to help you become better informed and also to prepare you to speak meaningfully and effectively with your aging parents.

Another resource that we recommend is Tim Prosch’s book, The Other Talk: A Guide to Talking with Your Adult Children about the Rest of Your Life. Tim spoke to our clients in 2014 and we still give his book to our clients. In some cases, the parents use the book to facilitate a conversation with their adult children. And in other cases, the adult children use the book as a vehicle to begin a conversation with their parents. You can read three blogs or articles on this topic below on our website:

And let us know how “the talk” went or if we can be a resource to help facilitate it.

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Retirement: Six Facts That Might Surprise You

With all that has been said, written, and discussed about preparing for retirement, it might seem that there is very little remaining that still needs to be talked about. However, some recent studies suggest that many approaching retirement may still be relatively in the dark concerning some important emerging trends that could have a huge effect on their retirement needs and the investment and financial strategies required to meet them.

  1. Retirement could last a lot longer than you expect. Currently, the average American will retire at age 66 and live until about age 79. But that average is consistently moving higher; for those on the younger end of the spectrum, it is entirely possible that they could spend as many years in retirement as they did working! Indeed, many researchers are predicting that living past the age of 100 will become the norm in the developed world; a World Economic Forum white paper suggests that the average life expectancy for babies born in 2007 will be 103. Even now, a 65-year-old woman has a 50 percent chance of living to age 85, and a man of the same age has the same chance of reaching age 82. In other words, most of us can expect to live for about two decades in retirement, and that time span is only going to get longer.
  2. Social Security is likely to fall short. Many advisors suggest that retirees should aim to be able to replace 80% of their pre-retirement income upon reaching retirement, and a significant portion of that is expected to come from Social Security. However, the current average monthly benefit is only $1,360, or $16,320 per year. For those earning in excess of $50,000 per year, this obviously leaves a lot of ground that must be made up with IRAs, 401Ks, or other investments.
  3. Americans are falling behind in savings. A 2013 study by the Economic Policy Institute found that a typical couple in their mid-50s to early 60s had only about $17,000 set aside for retirement. That would not likely fund a full year of most Americans’ lifestyles, let alone a two-decade retirement!
  4. Because of the historic shift away from lifetime employment at a single company (and the resulting pensions many enjoyed), only about 21 percent of Americans can expect a lifetime income from employer plans. Also, most of us have not replaced the traditional employer pension plan with a 401(k), IRA, or other defined contribution plan. As a result, nearly half of Americans have no workplace-related retirement savings vehicle of any type.
  5. Many of us will remain in the workforce past traditional retirement age. Due to many of the factors shown above, 14 percent of 70-year-olds are still working full-time, according to a study by the National Institute on Aging. Another 14% work part-time.
  6. Medicare will not cover the costs of assisted living. According to government data, around 70 percent of those who reach age 65 will need long-term care at some point in their retirements. Unfortunately, most don’t realize that Medicare does not pay for most costs of such care. In fact, Medicare covers only 100 days at a skilled nursing facility, and that only applies if the care was preceded by a hospital stay of three days or more. Meanwhile, the median costs of an assisted living facility is $3,600 per month.

For all of the above reasons, it is more important than ever for those planning for retirement to take full advantage of contributions to IRAs, 401(k) plans, 403(b) plans, and other defined contribution plans. Not only that, but investors should give careful consideration to the effects of inflation on their retirement nest eggs. A qualified professional financial advisor can help you learn your options and put in place a strategy that will help you face retirement with greater confidence.

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Give Your Retirement Plan a Boost

Good news from the IRS? This probably sounds like an oxymoron to many people. However, IRS notice 2017-64, released recently, actually contains some positive tidings for many taxpayers; it raises the annual contribution limits on most retirement plans, starting January 1, 2018. This is certainly good news for anyone with a 401(k), 457, or 403(b) retirement plan. For these plans, the new annual contribution limit is $18,500, up from $18,000 in 2017, with the catchup provision for those 50 and older still at $6,000 per year. The IRS also raised the annual benefit limit for traditional pension (defined benefit) plans, from $215,000 in 2017 to $220,000 in 2018. Additionally, they raised the annual allowable compensation limit for deduction, benefit, and contribution purposes from $270,000 in 2017 to $275,000 in 2018. This means that for higher-earning employees, more income can be taken into account for determining employer and employee contributions (less excluded income translates into more money available for contribution to the retirement plan).

A married couple filing jointly can reduce their taxable income by $37,000, if they make the maximum contribution to their 401(k) plans. Assuming a 25 percent tax bracket, that amounts to a tax savings of $9,250–pretty significant for most of us! Not only that, but they’ll obtain tax-deferred growth on their savings until they start making withdrawals in retirement.

Annual limits for traditional IRAs remain at $5,500 for 2018, along with the $1,000/year catchup provision for persons age 50 or older. However, the IRS adjusted upward the amount of money you can earn and still make deductible contributions to your IRA, even if you are eligible to participate in a workplace retirement plan. Single filers who make up to $63,000 can contribute (compared to $62,000 in 2017), and married filers can earn up to $101,000 (vs. $99,000 in 2017).

The IRS also made a slight increase in the amount you can contribute to a Health Savings Account (HSA): $3,450 in 2018, compared with $3,400 in 2017.

A $500 annual increase may sound like a minor improvement, but it can have a major impact on your retirement. If you’ve got as much as 20 years to retirement and you earn only a 5 percent average return, that extra annual contribution could add another $17,000 or more to your retirement fund. And if you can earn an average market return of about 8.5 percent, it would mean an extra $26,000. It all adds up!

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Nobel Prize-Winner’s Theory Describes “The Rest of Us”

Most economic models of market strategy are predicated on a flawed premise: that investors behave rationally. In most market models, the assumption is that all the factors impacting investment decisions are known, that all prices are a fair assessment of actual value, and that buyers and sellers are making their decisions based on logic and mathematics.

Do you know anyone who behaves according to these principles, especially in a market that is either overheated on the upside or falling through the floor on the downside? Neither do I.

That’s why many in the world of economics and professional investing sent up a cheer when the Royal Swedish Academy of Sciences announced the winner of the 2017 Nobel Prize for Economics. Richard Thaler, an economist at the University of Chicago, spent his entire career exploring and trying to understand the differences between the idealized assumptions of many academicians and the actual decision-making behavior of human investors.

Thaler studied and formulated a theoretical basis for understanding the mental shortcuts that people take when they make financial decisions. These mental processes, sometimes called “heuristics,” lead us to believe that we are making decisions rationally, despite the fact that we are often merely following well-worn emotional paths to the same illogical destination.

For example, one of Thaler’s most famous experiments involves what we now call the “sunk cost fallacy.” Suppose someone bought a ticket to the theater that cost $100. On the way to the show, they realize that the ticket is lost. Most people will sadly return home, believing that $200 is too much to pay to see the show. However, Thaler demonstrated that this is a logical fallacy; if it was worth $100 to see the show in the first place, it would still be worth that. The purchaser already decided that the show was worth $100, and it presumably still is, so based strictly on mathematical logic, she should simply go and purchase another $100 ticket in order to experience the original value. However, most people illogically view the cost of the ticket as “sunk,” and fail to make the purely logical choice.

Another of Thaler’s concepts involves what economists call “recency bias,” which means that we tend to expect more of what we have experienced most recently. So, if the market is going up, we expect it to continue. If it is dropping, we expect it to keep heading for the basement. Neither expectation is based on logic, but our heuristic behavior makes us believe they are.

All of Thaler’s work involves a concept called “behavioral investing,” which encompasses the way that emotions influence our financial decisions. Behavioral investing accounts for the ways in which our fear (loss aversion) and our greed (desire to gain) can both cause us to make irrational investing decisions that often undermine our ability to achieve our long-term goals.

The work of Richard Thaler and other economic theorists forms an important foundation for the evidence-based investing principles that our firm, along with many professional advisors, uses to guide portfolio strategy. As Thaler realized, most of us allow our emotions to guide us more than we realize. A qualified professional advisor can help you put logic–and science–to work for you and your portfolio.

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The Surprising Resiliency of the Stock Market

A recent report from J. P. Morgan Asset Management highlights a number of interesting facts, including this one: the S&P 500 index has exhibited a positive intra-year return in twenty-eight of the last thirty-seven years. In other words, 75 percent of the time since 1980, the S&P 500, which is the stock index most widely used by financial professionals to gauge the condition of the equity markets, has ended the year higher than it began the year. Admittedly, in some years, the gain was only 1 or 2 percent–and in some years (25 percent of the time) the return was negative, once showing a 38 percent loss. Not surprisingly, this occurred in 2008, when the implosion of mortgage-backed derivatives triggered the market meltdown that jump-started the Great Recession.

Given the above, the average intra-year return for the S&P 500 since 1980 has been 16.29 percent for those years in which it was positive. When we factor in the years of negative or no return, the average since 1980 is 9.5 percent in positive return, from January 1 through December 31 of each year (as this is being written, so far in 2017, the return on the S&P 500 is 8 percent). The aggregate return since 1980, after adjustment for inflation, is 552.81 percent. If all dividends received during that time had been reinvested, the total return rises to 1,637.35 percent. Remember, that includes the 25 percent of the time when stock returns were negative or zero for the year.

Why should we care about this? Well, the principal reason is that this underlines the long-term resiliency of the equity markets. The equity market, of course, consists of the public companies that manufacture, market, and provide the goods and services that we all depend on each day. These companies continue to do business through good economic conditions and bad. Each day, the best-run and most astutely managed of these companies find ways to improve how they do business. This continuous improvement and innovation is the engine that drives our economy forward, day after day. The aggregate of all that effort is reflected in the earnings that these companies generate, which ultimately is captured in the price of their stock: the value attributed to these companies by the thousands upon thousands of buyers and sellers who make up the stock market.

The other important fundamental fact emphasized by this information is the importance of efficient markets. As long as individual buyers and sellers are able to fairly exercise their collective judgment on the worth of stocks–judgment reflected in the millions of daily transactions–the markets will continue to function as they are meant to do. Such efficient markets are the investor’s friend. Over the long haul, these markets have been the number-one generator of wealth for everyone from the largest mutual funds to the individual preparing for retirement. Certainly, no one can guarantee any particular future result for the stock markets, especially for any given year. The markets go up, and sometimes they go down. But over the long term, they have proven exceptionally durable. And that is a very good thing.

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Trump’s Tax Overhaul: What We Know Right Now

National attention turned toward overhaul of the U.S. tax code recently, as Congress released its highly anticipated “Unified Framework for Fixing Our Broken Tax Code.” The motto for the document, inscribed at the top under the bold legend “Tax Reform,” is “More jobs; fairer taxes; bigger paychecks.”

Without doubt, every American would welcome these three results. But does this much-touted framework document actually represent a foundation for delivering on this, one of the major campaign promises of both President Trump and many congressional candidates? It’s fair to say that at this very early stage, it is difficult to tell. In fact, given some of the recent comments of certain influential lawmakers like Sen. Bob Corker (GOP, TN), it is far from certain that Congress will be able to get a bill passed any time soon. For that reason, we don’t believe private or corporate clients should start overhauling their tax or investment strategies just yet. Nevertheless, there are some general outlines discernable in the framework document that bear consideration.

  1. Corporate tax relief: The outline document signals rather clearly that reducing the amount of taxes paid by America’s corporations is a key aim of the current tax reform effort. The document specifically lists “tax relief for businesses, especially small businesses” and “ending incentives to ship jobs, capital, and tax revenue overseas” as principal goals of the overhaul process. Generally, the plan would accomplish this by a combination of lower maximum corporate tax rates (from 35 to 20 percent) and special incentives for multinational companies to keep profits generated by foreign subsidiaries in the US and also bring previously generated profits “back home” to benefit the US economy.
  2. Simplified tax code, especially for middle-income filers: The plan proposes to collapse the current seven tax brackets to just three: a 12-percent bracket (actually an increase from the current 10 percent); a 25-percent bracket, and a top bracket of 35 percent. So far, we don’t know what the income cutoffs for each bracket are, and that will make a lot of difference in how various taxpayers will fare under the new proposal. President Trump has suggested that the 25 percent bracket might start at $75,000 for a couple filing jointly, and that the 35 percent bracket might begin at $225,000 for joint filers. In order to pay for the presumed reduction in tax revenue indicated by this change, the plan would also eliminate many current deductions, such as those for state and local income taxes. Obviously, lawmakers from states with higher state and local income taxes can be expected to contest this provision vigorously. On the other hand, the proposal suggests raising the standard deduction to $12,000 for individuals (from $6,300 currently) and to $24,000 for couples (from $12,700 currently). For many filers, this could effectively increase the “zero bracket” for income not subject to taxation—though probably not doubling it, as one news release recently claimed.
  3. Benefits for the wealthiest taxpayers: Two goals of the proposed overhaul will appeal especially to the top tier of filers: the repeal of the alternative minimum tax (AMT) and the repeal of the estate tax (death tax) and the generation-skipping transfer tax. These provisions are onerous to the wealthiest Americans, and most would be delighted to see them disappear. However, the draft framework also contains a somewhat ambiguous statement that suggests “an additional top rate may apply to the highest-income taxpayers” in order to insure that the nation’s tax burden is not unduly shifted from the wealthiest to the middle- and lower-income taxpayers. So, while some benefits to wealthy filers might accrue in one area, they may not fare so well in others.

As suggested above, at this early stage, it seems best to keep in mind the ancient Greek proverb: “There’s many a slip ‘twixt the cup and the lip.” But the terms outlined above seem likely to form, at the very least, the stage on which this latest tax reform drama will play out.

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When Disaster Strikes: Moving Back toward Normal

Without question, a natural disaster can alter your life forever. Most important, of course, is doing all you can to insure your personal safety, along with that of your loved ones and friends. But even if you and your family survive the flood, storm, fire, or earthquake, the emotional trauma inflicted by the uncertainty and the damage or loss of your property can take a toll that lasts for years.

In previous articles on September 11th and September 18th, we’ve discussed the importance of taking steps that will allow you to begin rebuilding your finances as soon as possible following the disaster. We talked about securing your most important documents so that you can begin working effectively and as soon as possible with federal and state agencies, insurers, and others. Next, we looked at establishing a priority list for whom to contact first in order to get and stay on the road to recovery.

Now, let’s consider some of the longer-term implications of financial recovery from disaster. Once the initial shock has passed and you have had a chance to both take stock of your current situation and begin working with various entities to get re-established, it’s time to look a bit farther down the road and try to anticipate both the ways the disaster has changed your life and what you can do about it.

If you were disabled as a result of the disaster, you may be concerned about the possibilities of going back to your previous employment. You should know that the Americans with Disabilities Act (ADA) offers important protections to disabled persons who work for a company that employs fifteen or more. You may be able to ask your employer for a “reasonable accommodation” in order to resume your previous duties. In such a case, you may be able to go back to work as before. On the other hand, your disability may qualify you for Social Security and other benefits. You may need to consider whether going back to work or applying for and receiving benefits is more advantageous. Information about both benefits and “back-to-work” programs for disabled persons is available at this Social Security Administration webpage.

You may have other available sources of income, such as special disaster relief funds from federal, state, and local governments. Such funds, if you receive them, are usually not taxable. You may also be able to negotiate with your employer to receive an earned bonus early, or to work overtime in order to make up some lost income. If, on the other hand, the disaster forced your employer to close or lay off workers, you may qualify for state unemployment benefits while you look for a new job (these benefits are usually taxable). You may even be able to tap into your retirement plan. In the case of permanent disability, withdrawals are not penalized. It may also be possible to utilize cash value of life insurance policies to help tide you over until your income stabilizes.

Local housing authorities can assist renters who are having difficulty with payments, and if you own your home, you may be able to work out a mortgage forbearance agreement that will allow you to make reduced or no payments for a certain period of time. If you are concerned about working successfully with your mortgage lender, you may wish to review the information at the U.S. Department of Housing and Urban Development (HUD).

You may be able to find ways to reduce expenses, increase income, or both, as you construct your long-term recovery plan. If the disaster has taken you out of the workforce for some period of time, you may qualify for assistance with retraining. State employment offices offer programs for certain persons who are seeking to rejoin the workforce.

The University of Minnesota Extension service has developed a great overall resource for families and individuals seeking help for financial recovery from disaster, “Recovery after Disaster: The Family Financial Toolkit.” While this resource was developed initially for those living in Minnesota and North Dakota, it also offers many strategies that are non-state specific, including handy references to many federal agencies such as HUD, the Department of Labor, and others.

Most important of all, now–while you are on the road to recovery–is the time to make a plan for the next disaster. While we all hope that such events will never repeat themselves, one of the best things you can do for yourself and your family is to apply the steps and tactics we have outlined in this series of articles to being prepared. The best disaster preparedness plan is the one you never have to use. But if you do need it, it will be worth its weight in gold.

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Equifax Breach, Revisited: Four More Steps to Protect Yourself

On September 9th, I created a blog (What Should You Do about the Equifax Data Breach) and recommended that consumers who are concerned about the recent breach at Equifax (and more than 160 million of us should be concerned) should place a security freeze on their credit reports at Equifax, Experian, TransUnion, and Innovis, the major, worldwide credit reporting companies. This service is free, and it will help to prevent identity thieves and scam artists from opening new credit accounts under your name.

However, a freeze alone does not protect you from every threat posed by the Equifax fiasco. In addition to credit information, hackers also accessed Social Security numbers (SSN), dates of birth, and drivers license numbers. These data can expose you to other dangers besides fraudulent credit accounts. You should take the following four steps to protect yourself.

  1. Guard your Social Security benefits. If you are approaching age 62 go to “My Social Security” and create your account to help guard your benefits. Even if you don’t plan to collect anytime soon, having your legitimate account in place will keep a thief from doing it before you do and having your benefits sent to a fake account without your knowledge. Even if you’ve set up your account but haven’t visited the website recently, you should do so now, just to make sure everything looks as it should. Also, in June, the Social Security Administration instituted two-factor authentication; when you enter your username and password, the site will send a text to your mobile phone with a security code that you must enter. This prevents identity thieves from accessing the account, since they don’t have your phone to receive the code. If anything looks amiss, contact the Social Security Administration immediately.
  2. Protect your tax refund. Once they have your SSN, thieves can redirect your tax refunds to themselves. The best defense is a PIN from the Internal Revenue Service (IRS), which must be included with your return. However, the only way you can get a PIN is if you’ve previously had a fraudulent return filed in your name or if the IRS otherwise determines you’re an ID fraud victim or likely to become one. At present, the IRS hasn’t said whether those victimized by the Equifax breach will qualify for a PIN. But it’s a good idea to request one anyway by filing a Form 14039 Identity Theft Affidavit available at the Internal Revenue Service website.
  3. Make sure your health insurance benefits are covered. With some of the data exposed by the breach, fraudsters can steal your benefits from Medicare, Medicaid, or private health insurance by filing false claims in your name. You should get copies of your medical records from providers to establish a baseline that can then be used to root out fake claims. If your medical provider uses an online patient portal, you should log in and check it to make sure that you recognize all the providers listed and that the treatments shown were actually received by you.
  4. Secure your drivers license. Your state motor vehicle department can give you a copy of your driving record, usually for a fee of about $10. Make sure the record matches up with your recollections. To see if any bad checks have been passed using your drivers license number, request your free annual report from the three major check verification companies: ChexSystems, Certegy, and TeleCheck. If you find evidence of fraudulent use, file a police report and request that your state department of motor vehicles flag your license number, which will alert law enforcement of the possible fraudulent use by anyone with your license. Then, you should request a new license number.

For more information and resources, visit the Identity Theft Resource Center. And above all, be careful out there!

Posted in Current Events, Fraud, Identity Theft | No Comments

When Disaster Strikes: Navigating Financial Recovery

In last week’s blog, we discussed the importance of having a plan for recovering from natural disaster. Whether you live on the Texas Gulf Coast, in Oklahoma’s “Tornado Alley,” in the San Francisco Bay area, in Florida, in the middle of timber country in Idaho, or anywhere in between, disaster can strike with very little notice. After your personal safety and that of your friends and loved ones, nothing is more important than dealing as successfully as possible with the financial damage that natural disaster inflicts upon your property and financial resources, whether it be from storm, fire, earthquake, or flood.

Last time, we listed the crucial documents that you’ll need in order to begin the recovery process. Securing and having on hand items like your Social Security number, birth certificates, and other primary personal documentation will give you a big leg up on working with insurance companies, federal agencies, law enforcement, and other corporate and governmental entities that are able to offer assistance as you begin the recovery process. Now, let’s consider some of the practical steps you can take in the aftermath of a natural disaster.

First, let’s discuss which agencies and other entities you should contact as soon as possible. The American Red Cross is always one of the first organizations to respond to any natural disaster, and especially if your home is too damaged to inhabit. Contacting them, either at their website or by calling the number of your local chapter, can help you obtain emergency housing and other necessary immediate assistance. If your community has been declared a federal disaster area, the Federal Emergency Management Agency (FEMA) can also help with emergency housing and even emergency cash assistance. Such financial assistance may also be obtained through state or local government agencies; it is usually nontaxable.

If possible, you should next secure your property. If authorities allow it, go home and gather any valuables and important documents that are retrievable. If you can, carry out temporary repairs and other measures to prevent further loss or damage. The Red Cross and FEMA may also be able to help you obtain materials to make these repairs. You will need to keep good records; your insurance company will likely reimburse you for any expenses you incur, as long as you can provide proper documentation.

Speaking of insurance companies, you should now notify your claims representative. At this time, you may wish to inquire whether your policy contains provisions for reimbursement of emergency housing costs, food, laundry, and other living expenses. Sometimes, the insurer will issue a check up front; other companies may require you to provide receipts for reimbursement. In either case, it is important for you to keep receipts for your expenses. Some of these reimbursements may be taxable, but proceeds used for repair or replacement are usually not.

Now it’s time to notify your creditors of your situation. If you are unable to live in your house, contact your utility companies and request that they halt billing until their services are available again. Ask other creditors for additional time to pay. In such circumstances, most creditors will work with you, especially if you call them before the payment due date. Prioritize communications with your mortgage holder, your vehicle lien holder (if applicable), and your insurer.

These initial steps will help you begin the process of getting back on your feet. In a future article, we’ll take a look at the longer-term implications of disaster recovery and how you can minimize the amount of time it takes to get back to a more normal routine.

NOTE: Many of the ideas in this article come from “Disaster Recovery: A Guide to Financial Issues,” published with the cooperation of the National Endowment for Financial Education, the American Institute of Certified Public Accountants Foundation, and the American Red Cross.

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When Disaster Strikes: Tips for Financial Recovery

The tragic images coming from the Texas Gulf Coast over the past few weeks and from Florida and the Caribbean over the past few days have surely reminded us all that natural disasters are no respecters of persons. In Houston, flood waters inundated neighborhoods filled with shotgun houses and exclusive suburban areas featuring million-dollar homes located on previously serene, wooded lots. Once the rains came, it made no difference: homes in both locations filled with water, driving the residents to rooftops, second stories, and, ultimately, to shelters holding thousands of evacuees.

How do you recover financially from a natural disaster like Hurricane Harvey and Hurricane Irma? How do you prepare for the next one? Perhaps you don’t live on the coast and you aren’t worried about hurricanes, but flash-flooding can occur far inland. And what about earthquakes, damaging hail, tornadoes, or wildfires, like the ones threatening California and the Northwest as these words are being written?

Anyone who owns property or has any type of financial assets needs a recovery plan for natural disaster. Over the next few weeks, we’ll be examining various aspects of natural disaster and looking at ways you can prepare yourself, your family, your property, and especially your financial infrastructure. While none of us can control the weather or the global environment, we can take measures to aid the quickest possible recovery from those cataclysmic events that none of us like to think about.

First, let’s think about what you’ll need as you begin the recovery process. In order to work as efficiently as possible with insurers, law enforcement, public safety officials, federal assistance personnel, and others, here is a list of some of the main documentation you’ll need:

  • Birth certificates
  • Death certificates, if applicable
  • Marriage certificate
  • Wills and Powers of Attorney (POAs), including medical POAs
  • Social Security cards
  • Medical records, including prescriptions
  • Insurance policies (life, health, disability, long-term care, auto, homeowner’s, if applicable)
  • Checking and savings account information
  • Retirement and brokerage account information
  • Recent pay stub
  • Recent utility bill
  • Vehicle titles and/or registration
  • Mortgage and/or deed documents
  • Safe deposit box information and key
  • Credit card information

Keep in mind, this is not an exhaustive list. You may have other documentation particular to your situation that is just as important as anything shown above. The point is, you need to have a collection place for these documents, and it needs to be able to survive a natural disaster. Ideally, you should be able to grab the container with all these papers and carry it with you as you are evacuating to a safe location. It is also possible that some of this information is stored in digital form. If so, are the data backed up on a server or other device that would survive local flooding, a major earthquake, or a fire? Is the information secured so that only authorized persons can access it? There are a number of cloud backup services that can help you make sure your most critical data are safe. Even if you must pay a small monthly service charge, the peace of mind that comes with knowing your critical documentation is safe and readily accessible is far more valuable.

In a future article, we’ll look at the immediate aftermath of a natural disaster: whom should you call first? What creditors should you prioritize, and which ones should you reach out to earliest? Are there sources for emergency cash assistance? Answering these questions will form the basis for your natural disaster financial recovery plan.

NOTE: Many of the ideas in this article come from “Disaster Recovery: A Guide to Financial Issues,” published with the cooperation of the National Endowment for Financial Education, the American Institute of Certified Public Accountants Foundation, and the American Red Cross, available and can be found on the web at the link above.

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