Frequently Asked Questions
How is my fee paid?
Our fee is allocated over the course of a year and is charged to the client's account monthly. For example, if you are paying an average fee of 1% we will be charging 1% divided by 12 each month. For example, if you have an account worth $100,000 here at VPI with a 1% fee we will charge $83.33 each month (100,000*.01/12).
What is a Registered Investment Advisor?
A Registered Investment Advisor (RIA) is a professional who provides investment advice and manages assets for individuals or institutions. An RIA is registered with the Securities and Exchange Commission (SEC) or a state securities regulator and must abide by a fiduciary standard, meaning they must act in their clients' best interests. RIAs may offer a range of services including financial planning, portfolio management, and retirement planning. They typically charge a fee for their services, based on a percentage of assets under management.
Why do I need to diversify my portfolio? What does that mean?
Diversifying your portfolio means spreading your investments across different asset classes, such as stocks, bonds, real estate, and commodities, to reduce risk and increase potential returns. You need to diversify your portfolio because investing all of your money in a single asset or a limited number of assets can be risky. If one of those investments performs poorly, it can have a significant impact on your overall portfolio value.
By diversifying your portfolio, you can:
Spread out risk: Different asset classes can respond differently to market conditions, so spreading investments across different asset classes can reduce the impact of market fluctuations on your portfolio.
Manage volatility: Diversification can also help manage the ups and downs of the market, as different investments may perform differently in different market conditions.
It's important to remember that diversification does not guarantee a profit or protect against loss, but it can help manage risk in a portfolio.
What is Estate Planning?
Estate planning is the process of organizing and preparing for the distribution of your assets and property after your death. Estate planning involves creating a plan for:
Distributing your assets: Estate planning can help ensure that your assets are distributed to the people you want to receive them, in the manner you want.
Minimizing taxes: Estate planning can help reduce the amount of taxes owed on your estate by utilizing strategies such as gifts, trusts, and charitable donations.
Appointing a guardian: Estate planning can help ensure that your children or dependents are taken care of if you are unable to do so.
Providing for incapacity: Estate planning can help ensure that someone you trust will make decisions for you if you become incapacitated.
Estate planning typically involves creating a will or trust and may also involve other legal documents such as a durable power of attorney, a healthcare power of attorney, or a living will. Estate planning can help ensure that your assets are distributed according to your wishes and that your loved ones are taken care of after you pass away.
How much of my savings should I invest?
The answer to this question will depend on several factors, including your financial goals, risk tolerance, and current financial situation. Here are some general guidelines:
Emergency fund: It's recommended to have an emergency fund with three to six months of living expenses.
Investment timeline: If you have a long investment horizon (10 years or more), you may be able to afford to invest a higher percentage of your savings in higher-risk, higher-reward investments such as stocks. If you have a shorter investment horizon, you may want to consider lower-risk investments such as bonds or cash.
Risk tolerance: Your risk tolerance will determine the types of investments you feel comfortable with. Some people may be comfortable with more aggressive investments, while others may prefer more conservative options.
Current financial situation: Your current financial situation, including debts, income, and expenses, will also impact how much you can afford to invest.
As a general rule, it's recommended to invest enough to reach your financial goals, but not so much that you jeopardize your financial security. A financial planner can help you determine an appropriate amount to invest based on your individual circumstances.
How much can I gift my children or family members without having to pay gift tax?
In the United States, you can gift a certain amount to your children or other family members without triggering the gift tax. Here are the current limits as of 2023:
Annual exclusion: You can gift up to $17,000 per recipient per year without having to pay gift tax. This limit is per person, so if you are married, you and your spouse can each gift up to $17,000 to the same recipient.
Lifetime exclusion: In addition to the annual exclusion, there is a lifetime exclusion of $12.92 million per individual in 2023, which means you can gift up to that amount over the course of your lifetime without paying gift tax. However, this higher amount is expected to sunset in 2026 so making strategic decisions with your planner today may be of upmost importance.
It's important to note that gifts above these limits will reduce your lifetime exclusion and may trigger the gift tax. It's also important to consider the tax implications of large gifts and to consult a tax professional for guidance.
How much money do I need to retire?
The amount of money you will need to retire depends on a variety of factors, including your lifestyle, inflation, and your life expectancy. Here are some general guidelines:
80% rule: A widely cited rule of thumb is that you will need 80% of your pre-retirement income to maintain your standard of living in retirement.
Expenses: Consider your expected expenses in retirement, such as housing, food, transportation, and healthcare.
Savings: Evaluate your current savings and estimate how much you will need to save each year to reach your retirement goals.
Social Security: Consider the benefits you will receive from Social Security and any other sources of retirement income.
Inflation: Factor in the impact of inflation over time, as your expenses are likely to increase in the future.
Ultimately, the amount you need to retire will depend on your individual circumstances, and it's important to plan and save early for retirement. A financial planner can help you create a personalized retirement plan and estimate the amount of money you will need to retire comfortably.
Why should I work with a Certified Financial Planner?
Working with a Certified Financial Planner™ (CFP) professional can offer a number of benefits, including:
Expertise: CFP® professionals have completed rigorous education and experience requirements and are held to high ethical standards, providing you with expertise and guidance in a variety of financial areas.
Comprehensive planning: CFP® professionals can provide a comprehensive financial plan that takes into account your entire financial picture, including your investment portfolio, taxes, insurance, retirement planning, and estate planning.
Objectivity: CFP® professionals are trained to provide objective, client-centered financial advice, without the conflicts of interest that can arise with other financial professionals.
Personalized recommendations: A CFP® professional will take the time to understand your unique financial situation and goals and provide customized recommendations tailored to your specific needs.
Ongoing support: A CFP® professional can provide ongoing support and help you track your progress and make adjustments to your financial plan as needed.
Working with a CFP® professional can provide peace of mind and help you achieve your financial goals, whether you are saving for retirement, buying a home, or planning for college.
What do I do with my 401(k) when i retire or move jobs?
You have several options for your 401(k) when you retire or move jobs:
Roll over to a new employer's 401(k) plan, if available.
Roll over to an individual retirement account (IRA).
Cash out (although this is not recommended due to taxes and penalties).
Leave the funds in the current 401(k) plan, if permitted by the plan.
It is recommended to consult with a financial advisor before deciding.