Building Mi Financial Future Financial Toolkit

Financial Toolkit

Introduction

M-O-N-E-Y

For most people, the word “money” conjures up very specic thoughts and feelings – some good, and some,

perhaps, not-so-good. What is your relationship with money?

• Is it purposeful and well thought out, or are you more likely to “wing it”?

• What if something unexpected happened? Do you have ample savings in an emergency fund?

• Do you know what questions to ask, what you should do, or how to get started?

• Are you comfortable with the amount of debt you have?

• How is your credit? Do you know your credit score and what aects it?

• When dealing with your personal nances, do you feel uncertain, frustrated or confused?

• Will your loved ones be protected should something happen to you?

• Are you on track to live comfortably in the phase of life when your income is signicantly reduced,

which some call “retirement”?

• Do you know who to trust or where to turn for answers?

• Like many, are you simply unaware of all you should be thinking about?

• Would you like to be informed, aware, and in control of your nancial future?

Addressing these topics and numerous others needs to be part of the plan for your future self and your nancial

life, today. But how?

Developed to serve you and all Michigan residents, this Building Mi Financial Future toolkit was created to help

address your nancial questions. Through the collaborative eorts of government and nancial professionals

from the public, private and non-prot sectors, information contained in this toolkit is designed to provide you

with tools and resources to empower you to make better nancial decisions while building your nancial future.

Become engaged, connected, informed and empowered! Whether you are looking for ideas on how to save

for short-term needs or for retirement, or you’re seeking direction on budgeting, credit, debt, protecting your

assets, investing, how to avoid identity theft, or health or long-term care insurance, we believe you will nd this

guide useful as you plan for a secure nancial future.

This resource would not have been possible without the support and expertise of the Michigan Association of

Certied Public Accountants, LifeGuide 360 LLC, and Michigan State University Extension.

Additional copies of the Building Mi Financial Future toolkit, as well as the Reinventing Mi Retirement toolkit,

are available from:

Michigan Department of Insurance and Financial Services

Oce of Consumer Services

P.O. Box 30220

Lansing, MI 48909-7720

877-999-6442

This publication is also available electronically at www.michigan.gov/difs

Table of Contents

Trends in Banking .................................................................................................................. 1

Credit Reports and Credit Scores .......................................................................................... 3

Ways to Pay o Credit Card Debt .......................................................................................... 5

Managing Student Loans ...................................................................................................... 7

Qualifying for a Mortgage ..................................................................................................... 9

Protecting Your Identity in a High-Tech World .....................................................................11

Getting Married: Tips for Consolidating Finances ................................................................13

Planning for Your Child’s College Education ........................................................................15

Financial Advisors: An Overview ..........................................................................................17

Building Your Net Worth ......................................................................................................23

The Health Insurance Mandate: Get Covered or Pay a Penalty ...........................................25

Life Insurance: Who’s Depending on You? ...........................................................................27

Long-Term Care Insurance: Is it Right for You? ................................................................... 29

Planning for Retirement ......................................................................................................31

Trends in Banking

Trends in banking are changing the way many of us utilize personal banking services. The growing availability of

online services and the increasing functionality of smartphone apps are transforming banking into an anytime,

anywhere experience.

Regardless of whether you prefer paper

statements and going to your local bank/credit

union branch over online banking and live chats

through your smartphone, there are common

terms and services associated with banking. To be

a more informed and aware consumer, you need

to be familiar with these terms and services and

whether there are fees or other charges that apply

to them.

What to Know

Monthly Maintenance Fees

Know the monthly fee your bank/credit union

charges to maintain your account and if they waive

the monthly fee if your account meets certain

requirements, such as maintaining a minimum

balance or using direct deposit for your paycheck.

Online Banking Services

Know what banking services are available to

you online. While online services dier between

institutions, typical online services include:

• Account balance

• Account activity

• Account statements

• Bill payment

• Message center

• Fund transfers

Note: Most banks/credit unions do not charge a fee for fund transfers between your accounts or transfers to

other customers of the bank/credit union. Most charge a fee for fund transfers to and from outside nancial

institutions.

Mobile Banking

Most banks/credit unions are building out their mobile banking services with new apps that oer greater

functionality and ease of use. While this form of banking oers tremendous conveniences, it also presents

security challenges for banks/credit unions in authenticating the identity of users logging into their accounts.

Be aware of this.

Not all mobile services are created equal. If you are interested in using mobile banking, you may want to

compare the mobile services of several banks/credit unions. Reputable third-party reviews are a good starting

point.

ATM Usage

While your bank/credit union may not charge

a fee when you use their ATMs, using the ATM

of another bank/credit union can result in a fee

from both banks/credit unions: a fee from your

bank/credit union for using another bank’s/

credit union’s ATM, and a fee from the bank/

credit union that operates the ATM you used.

It’s important to know what these fees are.

They could be higher than you think.

Overdraft Fees

Banks/credit unions generally charge a fee

if you write checks that total more than the

balance in your account. You need to know

what the charge is, and if there are conditions

under which the bank/credit union may

reverse the charge. You generally can avoid overdraft charges with optional overdraft protection. Typically, this

protection is linked to a savings account or credit card, usually for a fee. Find out what your bank/credit union

charges for this protection and what the terms are. Note: if you use a debit card tied to your account, most

banks/credit unions won’t let you overdraw your account at the point of sale. This helps you avoid overdraft

charges. You should contact your bank/credit union if you’re interested in this option. You may have to set it up.

Checks and Replacement Cards

If you use traditional paper checks, nd out if there are fees associated with check-writing. Some banks/credit

unions do not charge for check-writing, while others allow free check-writing up to a certain number of checks

per month. Most banks/credit unions charge a fee for ordering new checks. If you use a debit card, some banks/

credit unions charge a fee to replace a lost or destroyed debit card.

Interest-bearing Checking

Interest-bearing checking accounts are oered through most banks/credit unions. Many even oer tiered

rates if your account meets certain requirements. In most cases, the interest paid on checking accounts is very

low. Depending on your needs and preferences, your bank/ credit union may oer a higher interest-paying

alternative to your checking account.

Where to Turn

If you have questions about your checking account or other type of bank/credit union account, contact the nancial

institution directly. Should you have a complaint against your nancial institution, send your complaint to:

Department of Insurance and Financial Services (DIFS) for state chartered banks and credit unions,

877-999-6442, or online at www.michigan.gov/difs

If your complaint is against a federal credit union, send your complaint to:

National Credit Union Administration (NCUA), 800-755-1030, or online at

www.ncua.gov

If you have a complaint against a national bank, send your complaint to:

Consumer Financial Protection Bureau (CFPB), 855-411-2372, or online at

www.consumernance.gov

Credit Reports and Credit Scores

What to Know

Credit Reports

A credit report contains information about your credit, bill payment history, and the status of your credit accounts.

This information includes how often you make payments on time, how much credit you have, how much credit

you have available, how much credit you are using, and whether a debt collector is collecting on money you owe.

Credit reports can also contain rental payment information and information on your utilities payments. Certain

public records, such as liens, judgments, and bankruptcies, are also included in your credit report.

Credit reports are generated by the three major consumer credit reporting agencies:

• TransUnion

• Experian

• Equifax

You are entitled by law to a free copy of your credit report from each of the reporting agencies once a year. You

may request your free credit report at www.annualcreditreport.com

How Credit Reports are Used

Lenders use your credit report to help them decide if they will loan you money, what interest rates they will

oer you, or to determine whether you continue to meet the terms of the account. Insurance companies may

pull the credit report of an applicant who has applied for a large amount of life insurance. Employers may use

credit reports when making employment decisions about you.

Credit Scores

A credit score is a three-digit number calculated from data on your credit report. A complex algorithm called a

scoring model is used to compute your credit score. FICO® is the most popular credit scoring provider. FICO®

scores are available through the three consumer credit reporting agencies. Your credit score may dier between

reporting agencies. While your credit report is available to you without cost, you typically pay a fee to get your

credit score.

Calculating Credit Scores

Five categories are used in calculating your score. Some categories aect your score more than others. For

example, your credit payment history determines 35% of your score. Listed below are the ve categories listed

by their percentage weighting in calculating your credit score:

• Payment history: 35%

Have you been making your payments on time? Lenders like to see this.

• Amount owed: 30%

Owing a lot doesn’t make you a high-risk borrower, but lower amounts of debt are viewed more

favorably by lenders.

• Credit history: 15%

In general, the longer your credit history, the better your score.

• Types of credit: 10%

Is all your debt on credit cards? Lenders like to see a mix of credit cards, retail accounts, installment

loans, nance company accounts and mortgage loans.

• New credit: 10%

If you have opened several credit accounts in a short period of time, this is generally regarded as posing

a higher risk to lenders.

How Do I Evaluate My Credit Score?

Here are general guidelines lenders use in evaluating your credit score:

FICO® Credit Score Rating

751 to 850 Excellent

721 to 750 Very Good

661 to 720 Good

620 to 660 Fair

300 to 619 Needs Improvement

Build a Good Credit History

• Pay your bills on time

• Bring delinquent loans current

• Pay down or pay o credit cards, but don’t close them

• Have a good mix of credit

• Don’t open a lot of new credit lines in a short period of time

• Check your credit report at least once a year at www.annualcreditreport.com

Factors That Aect Your Credit Score

• Late payments. It takes about 24 months to restore credit from late payments.

• Derogatory information. This includes bankruptcies, foreclosures and tax liens.

• Credit cards with no available credit. Maxed-out cards can lower your score.

• Opening multiple new accounts in a short period of time.

• Closing revolving accounts with long history. Try not to do this. Reducing your credit history can lower

your credit score.

• Lowering credit limits on existing revolving credit lines. Try not to do this. It may increase your

balance-to-available credit ratio which will, in turn, lower your credit score.

Where to Turn

For More Information and Resources:

• Fixing Your Credit FAQs (Source: FTC) – https://consumer.ftc.gov/articles/fixing-your-credit-

faqs

• Power Pay – online, free debt consolidation

simulation (Source: Utah State Extension)

https://powerpay.org

• Sample Letter for Disputing Errors on Your Credit

Reports (Source: FTC.gov) –

http://www.consumer.ftc.gov/articles/0384-

sample-letter-disputing-errors-your-credit-report

Ways to Pay O Credit Card Debt

What to Know

Credit cards are a convenient way to make both large and small purchases. They can also lead to a signicant

amount of debt. If you have high balances on two or more cards, below are three strategies to help you to pay

them o.

What to Do

Create a Spreadsheet or Chart

Use the following labels for six columns. From left to right:

1. Credit Card Issuer

2. Interest Rate

3. Balance

4. Credit Limit

5. Credit Utilization Ratio (Balance / Credit Limit = Ratio)

6. Minimum Payment

Next, add one row for each credit card on which you owe, and ll in the columns for each one. Once your chart

is complete, read through the following strategies and select the one that’s right for you.

Strategy 1: Pay O the Smallest Balance First

This approach builds “pay-o momentum.” Note: Online calculators can help you calculate pay-o dates given

certain payment amounts.

1. List your credit cards from lowest balance to highest.

2. Pay only the minimum payment due on the cards with larger balances.

3. Pay additional on the cards with the smallest balance.

4. When a card is paid o, apply additional payment to the card with the next smallest balance.

Strategy 2: Pay O the Highest

Interest Rate First

This is the best dollars-and-cents

approach.

1. List your credit cards from

highest interest rate to lowest.

2. Pay only the minimum payment

due on cards with lower interest

rates.

3. Pay additional on the cards with

the highest rate.

4. When a card is paid o, apply

additional payment to the card

with the next highest interest

rate.

Strategy 3: Pay Down the Debt That Helps Your Credit Score the Most

This approach improves your credit score and potentially reduces your future borrowing costs by paying down

cards with the highest credit utilization ratios. For example, a credit card with a $4,000 balance and a $10,000

credit limit has a 40% credit utilization ratio. A ratio below 30% is recommended.

1. List your credit cards from the highest credit utilization ratio to the lowest.

2. Pay only the minimum payment due on credit cards with lower ratios.

3. Pay additional on the cards with the highest credit utilization ratio.

4. When a card is paid o, apply additional payment to the card with the next highest utilization ratio.

Other Things You Can Do

Balance Transfer

While making timely payments on your credit cards is important, if you’re unable to pay the balance o

in full every month, only making minimum payments, you may want to shop around for long-term, low

or zero-percent interest rate transfer opportunities. Keep in mind that many zero-percent or low interest

oers may only last for a limited time, after which the interest rate and payment may increase. There may

also be charged fees, such as a “balance transfer fee,” which is usually a certain percentage of the amount

transferred. As a result, the new card could end up costing you more in fees and interest.

Talk to the Credit Card Issuer

The issuer may be willing to waive fees, reduce interest rates, or accept lower minimum monthly payments.

Where to Turn

Questions or requests related to your credit cards should rst be made to the card issuer. Consulting with a

non-prot or credit counselor may be another option.

• For additional information or to le a complaint against a credit card company contact the Consumer

Financial Protection Bureau (CFPB), 855-411-2372, or visit www.consumernance.gov.

EXTRA

The Federal Trade Commission

reported approximately 82

million U.S. consumer records

were exposed through data

breaches.

Be on the lookout for a wireless

camera disguised to look like

a leaet holder that may be

mounted in a position to view

ATM PIN entries. The thieves

copy the cards and use the

PIN numbers to withdraw

thousands from many accounts

in a very short time directly from

the bank ATM.

Managing Student Loans

What to Know

Student loans can take a decade or longer to pay o. This seemingly endless obligation can create nancial

stress and even inuence how you make major life decisions. Eectively managing your student loans can help

relieve your stress and nancial burden while protecting your credit.

What to Do

Know What Is Owed

Check the National Student Loan Data System to nd a complete inventory of all your federal student loans.

You may want to create a spreadsheet of these. Note: You will need your Federal Student Aid PIN to access your

information. If you have private student loans, pull a copy of your credit report. Your report will show the loans

you have with private lenders. Add these to your spreadsheet. The combined inventory of your loans will give

you a wide-eyed overview of your total loan obligations.

Pay O Loans With the Highest Interest Rate First

If you are able to pay o one or more of your student loans ahead of schedule, start with the loan with the

highest interest rate. Generally, these will be loans you have with private lenders.

Keep Lenders Up to Date

Lenders send out a lot of important information you don’t want to miss. Keep your loan servicers up to date

with your contact information, including your email address.

Options to Consider

Federal Student Loan Consolidation

If you have federal student loans, especially older, nonconsolidated loans with a variable interest rate, you

may want to consider consolidating your loans. By consolidating your loans, you may be able to extend loan

repayment from the 10-year standard to 15 or even 30 years.

A loan consolidation also means a predictable payment. Note: lengthening the repayment schedule on your

loans may result in higher total costs over the long term.

Income-Driven Repayment Options

Income-driven repayment plans may make it easier for you to make payments on your federal student loans if

your debt is high compared to your income. The three main plans are Income-Based Repayment (IBR), Pay As

You Earn, and Income-Contingent Repayment (ICR). Your payment amount is based on your income. As your

income, family size, or state of residence change, so will your monthly payment amount. To remain eligible, you

will need to reapply each year and provide verication of your income. If you reapply each year and qualify, you

may have reduced monthly payments for up to 25 years, and any remaining balance may be forgiven. However,

you may be required to pay income tax on the amount that’s forgiven. Note: Income-driven repayment options

generally charge higher interest rates than other types of student loans.

Federal Student Loan Rehabilitation

If you are delinquent on your federal student loan(s), you may want to consider student loan rehabilitation.

You’ll need to contact the loan servicer (or collection agency) to arrange new payment terms. The loan servicer

is obligated to oer a repayment term that is “aordable and reasonable.” If you meet the terms and conditions

of the rehabilitation

agreement and your loan

is rehabilitated, your credit

report will no longer reect

the poor payment history

and the loans will show a

current status.

Public Service Loan

Forgiveness

This is a federal program

that forgives the student

debt of people working in

government, nonprot,

and other public services.

Additional loan forgiveness

programs are available for

borrowers working in certain

elds like public education

or public library services,

early childhood education,

military service, and

emergency management.

To be eligible, you must

have made 120 months

of on-time payments and

meet the employment

requirements. This program

only applies to federal loans.

Where to Turn

If you have questions related to your student loan payments, you should rst contact the lender directly to try

to resolve any issues with them and/or request any special payment accommodations.

For additional information on repaying your student loan or if you have a complaint against a student loan

company, you can contact the following regulators:

• Student Financial Services Bureau, Michigan Department of Treasury, 517-373-4897, or online at

www.michigan.gov/mistudentaid

• Department of Insurance and Financial Services (DIFS), 877-999-6442, or online at

www.michigan.gov/difs

• Consumer Financial Protection Bureau (CFPB), 855-411-2372, or online at www.consumernance.gov

Other Helpful Sources

The National Student Loan Data System at https://nslds.ed.gov

Free credit report at https://www.annualcreditreport.com

Qualifying for a Mortgage

Purchasing a home and taking out a mortgage may be the biggest investment you’ll ever make. Here are some

great tips to help prepare for the process.

What to Do

Plan Ahead

The most common factors that hurt your ability to get a mortgage are:

• Low credit score

• Inadequate income (documented income)

• Not enough savings

• High debt-to-income ratio

You’ll need to look at these factors and address

any shortfalls well in advance of applying for a

loan. This may mean waiting several months or

even a year or two before you apply.

Your Credit Score

As a matter of course, lenders look at your credit

report and credit score. Regardless of the lender,

the higher your credit score, the better the

nancing. So review your credit report and look

for inaccuracies. Inaccurate information can aect

your score. You can request a free copy of your credit report at www.annualcreditreport.com. If you nd inaccurate

information, contact the credit bureau that is showing the erroneous information.

If you have derogatory information on your credit report, develop a plan for improving your report. This may

mean paying down credit card debt and other installment loans. If you have a loan on a depreciating asset like

a recreational vehicle, you may want to consider selling it to eliminate the debt altogether. If you have payment

delinquencies of 30 days or more, start making timely payments. After a several month period, your credit score

will begin to improve.

Your Income

Your income level is used to determine how much house you can aord. The stability and dependability of your

income is also a factor. Evaluate your sources of income. Earned income from salary and wages is generally

viewed more favorably by lenders than income from tips and commissions. If your income is mostly from

sources regarded to be less reliable, you may be required to have a larger down payment, or look for a home

that is less expensive.

Your Savings

You will likely need a down payment. While the Federal Housing Administration (FHA) allows borrowers to put

down as little as 3.5% of the purchase price, conventional mortgage loans usually require a down payment of

10% to 20%. Although you can now write o Private Mortgage Insurance (PMI) on your tax return, putting 20%

down on a mortgage avoids PMI altogether.

Lenders like to see bank statements that show you’ve been accumulating savings for a down payment over an

extended period of time. Large, one-time deposits into your savings account are viewed less favorably and may

raise questions.

Your Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is a representation of your cash ow. It shows lenders what percentage of

your gross monthly income is spoken for to pay your xed expenses. A high debt-to-income ratio is viewed

negatively by lenders because it means less ”wiggle room” between your monthly debt and income.

Calculation: Monthly Debt Payments ÷ Gross Monthly Income = DTI%

Your DTI ratio is the total of your mortgage interest, principal, insurance payment, property taxes; all recurring

debt payments, such as auto loan/lease payments and credit card payments, divided by your gross monthly

income. The generally-accepted recommendation is for a ratio of 36% or lower.

Housing Cost Ratio

Another ratio lenders look at is your housing cost ratio (HCR). Lenders typically require home loan applicants to

have a housing expense ratio of 28% or lower. Why? Because the lower the ratio is between your housing costs

and your gross monthly income, the higher the probability that your home is aordable. This applies to existing

homeowners, too. The generally-accepted recommendation is for a ratio of 28% or lower.

The housing cost ratio is your total mortgage interest, principal, insurance payment and property taxes divided

by your gross monthly income.

Calculation: Mortgage Payment ÷ Gross Monthly Income = HCR%

Other Things to Do

Understand How the Process Works

A mortgage loan may be the largest loan you’ll ever obtain. You should do as much research on the process as

possible. Three good sources for information about a loan are:

www.michigan.gov/difs

www.hud.gov

www.consumernance.gov/

Know How Much House You Can Aord

Use an online “Mortgage Calculator” to get a rough estimate of what you may be able to aord. Your loan

ocer will determine how much you can actually aord, as there are other factors they take into consideration

besides the monthly payment. Once you have arrived at a loan amount, your loan ocer will issue you a

preapproval letter so you can start shopping for a home.

Where to Turn

Other valuable sources for information:

www.consumer.ftc.gov

www.freddiemac.com

www.zillow.com

www.bankrate.com

www.mortgagecalculator.org

Protecting Your Identity in a High-Tech World

What to Know

What is Identity Theft?

Identity theft occurs when someone uses the personal identifying information of someone else to pose as that

consumer in order to fraudulently obtain goods or services in the victim’s name.

We are all potential victims of identity theft. Knowing what scammers are looking for, how they get our

personal information, and what we can do to protect ourselves will help reduce our vulnerability to scammers.

What Information are Scammers Looking For?

Any of the following personal identifying information can be used by scammers:

• Social Security number (SSN)

• Birth date

• Address

• Driver’s license number

• Bank account number

• Credit card number

Note: With one or two pieces of

information, scammers can often get

other information about you.

How do Scammers Get My

Information?

It is important for you to keep all your

identifying information condential;

however, things happen that allow

scammers to get your identifying information:

• Lost or stolen wallet

• Theft by family or friends

• Dumpster diving - obtaining personal information from the trash

• Stolen mail

• Buying it from a corrupt insider at a bank, hotel, car rental agency, etc.

• Data breach - an incident in which an individual’s name plus a social security number, driver’s license

number, medical record or nancial record (credit and debit cards included) is potentially put at risk

because of exposure

• Skimming - occurs when scammers place a device on an ATM, gas pump or other point-of-service

device and electronically copy transmitted data on the magnetic strip of a credit card to enable valid

electronic payment authorization to occur between a merchant and the issuing nancial institution.

Social Networking

Social networking sites (e.g., Facebook, Instagram, Twitter), chat rooms, virtual worlds, and blogs have become

the “new normal” when socializing with our friends. However, it is important to learn how to navigate these

spaces safely.

What to Do

Protect your personal identifying information.

• Do not carry your Social Security card.

• Keep documents locked (paper) and secure (online).

• Protect smartphones/devices.

 Increase the security conguration of the smartphone before using it. Security settings are often

set at the lowest level by default.

 Run rewall and anti-malware software.

 Use caution when surng the internet and opening email. If you do not know the sender, do not

open the email, click on any links or open any attachments. Because text is small and often wraps,

it is easier to overlook something, so be even more careful.

 Make sure to set up a password on your smartphone to prevent others from accessing its data or

making unauthorized telephone calls.

 Only download les from trusted websites. Malware on a phone can steal information, account

credentials, or infect your computer when you synchronize.

• Be careful of what you share.

 Before sharing your SSN, ask questions.

 Make sure you verify the source requesting your SSN.

• Practice cyber safety.

 Use strong passwords.

 Beware of email phishing scams. Phishing is the online

scamming of your nancial information by posing as a legitimate

company.

• Safely dispose of personal identifying information.

 Shred condential documents before discarding in trash.

Where to Turn

If you think you are a victim of identity theft:

1. Contact the credit reporting agencies to place a fraud alert.

2. Close accounts that have been accessed.

3. As a precaution, change your passwords on other accounts.

4. Call the Michigan Attorney General to le a complaint.

File your complaint by phone or online at www.ftc.gov. You will receive an ID

Theft Adavit.

5. File a police report. When you attach the ID Theft Adavit to the

police report, this becomes an Identity Theft Report. This is necessary

for providing persuasive evidence of theft when disputing debts.

For additional information visit:

www.michigan.gov/difs

www.michigan.gov/AG

www.ftc.gov

EXTRA

In a report by the Federal

Trade Commission,

American consumers

reported losing over $1.6

billion to fraud. The FTC

reported approximately

82 million U.S. consumer

records were exposed

through data breaches. Be

on the lookout for skimming

devices cleverly disguised

to look like normal ATM

equipment. A “skimmer”

is mounted to the front of

the normal ATM card slot

that reads the ATM card

number and transmits it

to the criminals sitting in a

nearby car. Another piece of

equipment used to capture

your ATM card number and

PIN is a wireless camera

disguised to look like a

leaet holder that may be

mounted in a position to

view ATM PIN entries. The

thieves copy the cards and

use the PIN numbers to

withdraw thousands from

many accounts in a very

short time directly from the

bank ATM.

Getting Married? Tips on Combining Finances

What to Know

One way to help make your marriage work is to make the household nances work. This means that the two

of you need to agree on how to combine or coordinate your new household’s accounts and debt. And while a

constructive conversation about household nances may not be the most romantic interaction you can have, it

does contribute to the well-being of your marriage.

What to Do

Request a free copy of your credit reports at www.annualcreditreport.com

Think of your credit report like an ongoing report card of your use, management, and payment discipline of

loans, liabilities and obligations like utility bills, car loans, and credit card payments. It may be worthwhile to get

credit scores through one of the three credit bureaus: www.transunion.com, www.equifax.com, or

www.experian.com. With this information you can objectively evaluate your nances and identify the

strengths and any weaknesses in the reports, such as high amounts of debt or a history of late payments.

List all sources of income and expenses

All pay stubs, account statements, monthly bills and debt obligations need to be disclosed and listed. With

this information you can develop a budget for handling monthly expenses and plan corrective action for any

debt-related issues.

Open a joint checking account to pay for household expenses

If neither of you has credit-related problems, then both of your names can be on the account.

If one of you has poor credit, you may choose to have your account in only one name.

Decide who is going to pay for what

Option 1: “All for One and One for All”

You may decide to combine incomes and treat all expenses and debt obligations as one.

Option 2: “Pick and Choose”

You may agree to assign certain payments to one or the other. For example, if one of you owned a home prior

to the marriage, then that spouse may want to continue paying the mortgage. If one of you has student loans or

credit card debt that existed before the marriage, that spouse may feel it’s their responsibility to pay o those

debts themselves.

Option 3: “Income-based”

Another way to address nances is to pay ongoing expenses based upon income. For example, if one of you

has earned income that equals 60% of household income, then that spouse would be responsible for 60% of

household expenses.

Discuss the relationship each of you has with money

If one of you is a big spender and buys on impulse, the two of you need to discuss the potential negative

consequences of this behavior and arrive at a workable solution.

Consider opening a savings account for an “emergency or rainy day fund”

As a couple, one goal should be to have enough in this account to handle an unplanned event or emergency.

Three months of earned income is generally recommended; but, the stability and dependability of your

combined income should be taken into account when deciding on how much is enough. The two of you can

arrive at a monthly amount to save that is aordable and sustainable.

Update your beneciaries

If you have IRAs, annuities and life insurance policies, you may want to review and update the beneciary

information. If you participate in an employer-sponsored retirement plan, you’ll need to name your spouse as

the beneciary.

Take care of your future selves now

Be sure to contribute to your employer-sponsored

retirement plan and/or IRA. Every dollar saved now may

provide you with several dollars you can use to maintain

your dignity and lifestyle during your retirement years.

For employer-sponsored retirement plans, it’s generally

recommended that you contribute a minimum of 15% of

your combined gross pay, or the maximum amount allowed

by the IRS.

Where to Turn

www.michigan.gov/difs

www.annualcreditreport.com

www.transunion.com

www.equifax.com

www.experian.com

Money and Marriage: Let’s Talk About It

Financial matters are one of the top reasons for

conicts in a marriage. If you’re not on common

ground on money management, you’ll have unstable

ground in your marriage. You don’t have to view and

manage money in the same way, but it’s important

to understand and feel comfortable with your

dierences.

Money issues can be especially complex for older

couples who are getting married. You and your

partner likely have ingrained money habits that could

be quite similar or hugely dierent. You may have

wide disparities in your debts and assets. You may

have children from a previous relationship and want

to make special allowances for them.

For example, when marrying for the second time, one

partner may want to ensure his or her grown children

inherit life insurance proceeds left by a deceased

previous spouse. There are various legal structures

to consider in this case, such as setting up a trust for

the children or using transfer-on-death provisions.

Discuss a prenuptial agreement, which can also be

a useful tool in situations where there are children

from a previous relationship or one partner has

substantially more assets. An attorney can provide

appropriate advice on these kinds of situations to

help make sure everyone’s wishes are honored.

Sometimes one member of the marrying couple

owes back taxes, and the other does not want to

be liable for the obligation. In that situation, it is

recommended to use the “married, ling separately”

option allowed by the IRS and to keep nances

separate until the back taxes are resolved.

Couples often benet from discussing money matters

like these with a trusted nancial advisor. The advisor

can serve as an objective, third-party who provides

expertise while keeping the conversation focused,

positive, and less emotional.

Money is a very personal and emotional topic, but so

is marriage. If you hope to share the rest of your life

with someone, get started on a solid footing with a

clear understanding of your nancial life together.

Planning for Your Child’s College Education

What to Know

While it’s never too late to start saving for your child’s college education, it’s never too early either. To help you

save, Michigan oers four options:

• 529 Basics

A 529 plan is a tax-advantaged college savings/investment plan designed to encourage saving for the

future higher education expenses of a designated beneficiary (typically one’s child or grandchild). The

plans are named after Section 529 of the Internal Revenue Code and are administered by state agencies

and organizations.

There are two types of 529 plans: prepaid tuition plans and savings plans.

 Prepaid Tuition Plans allow for the pre-purchase of tuition based on today’s rates and then paid

out at the future cost when the beneciary is in college. Performance is often based upon tuition

ination. Prepaid plans may be administered by states or higher education institutions.

 Savings Plans are dierent in that your account earnings are based upon the market performance

of the underlying investments, which typically consist of mutual funds. Savings plans may only be

administered by states.

• Michigan Education Trust (MET)

The Michigan Education Trust (MET), Michigan’s guaranteed tuition program, allows parents,

grandparents, or others to purchase future college tuition at today’s rates. With tuition rates likely to

continue rising, MET provides a way for individuals to avoid rising tuition rates.

• Michigan Education Savings Program (MESP)

The Michigan Education Savings Program (MESP) is a savings/investment program designed to

assist families with preparing for higher education expenses. A child’s parents or others can open an

account for the child/beneciary. The MESP account then can grow through regular contributions and

investment growth.

• MI 529 Advisor Plan (MAP)

The MI 529 Advisor Plan provides Michigan residents with a way to invest in a 529 college savings

program utilizing the expertise of a nancial advisor. The MAP oers a variety of unique benets that

set it apart from other 529 plans in the country.

• Student Financial Aid

Student nancial aid consists of any source of funds available to students and their families to pay for

the cost of any postsecondary education. The main sources of student nancial aid are the federal

government, state government, institutions (colleges and universities), and private sources such as

associations, foundations, employers, and unions. Student Scholarships & Grants (SSG) administers

approximately 100 million dollars in scholarship and grant money to help Michigan students pay for

college.

What to Do

Look into ways to help reduce the cost of your child’s college education. For example:

• Many high schools oer college classes. The more credits your child can earn before entering college,

the better. Check with your child’s high school guidance counselor.

• Consider a community college for the rst year or two. Tuition is generally less expensive than a

four-year institution.

 Make sure course credits are transferrable to the college your child plans to attend later.

 Pay cash. This allows any college saving plans you have to continue to grow.

• Buy used books or check online for textbooks selling at a substantial discount to those in the college

bookstore.

• Look into cooperative education programs which allow your child to alternate between working full

time and studying full time. These programs are not based on nancial need.

• Apply for scholarships every year.

• See if your child qualies for merit-based aid.

Where to Go

• For additional information about MET, call 800-MET-4-KID (800-638-4543) or visit

www.setwithmet.com.

• For additional information about MAP, call 866-529-8818 or visit www.MI529Advisor.com.

• For additional information about MESP, call

877-861-MESP (877-861-6377) or visit

www.misaves.com.

• For more information about Student Scholarship

and Grants, contact SSG by calling 888-4-GRANTS

or visit www.michigan.gov/ssg.

When to start saving?

When should you start saving for your kid’s college? In

short, the sooner the better. The earlier you start, the

sooner you can take advantage of the compounding

eect of time on your investment. For example,

assuming an annual return of 6%, to reach a saving

goal of $100,000 when the child reaches 18, you

need to invest $256 a month if you start right after

your child is born. However, if you wait until the child

is 8 years old, then you would need to invest $607 a

month. With some investment options, such as a 529

plan, you can start saving for your kid’s college even

before they are born.

That said, it’s never too late to start saving either, even

if college is just a year or two away. You can still get

the tax benets many college saving vehicles oer. In

addition, it is less expensive to save for college than

to borrow. When you save, the money earns interest.

When you borrow, you pay the interest. Remember,

every dollar you save is one dollar less you have

to borrow. Just one catch if you start late – you

may need to consider taking a more conservative

investment approach, because your saving has less

time to recover from a market downturn.

Another college saving strategy is saving regularly.

Paying for college is like paying for any big-ticket

purchase. For most people, setting up a payment

plan where you set aside an aordable amount of

fund regularly, is much easier than making a big

contribution at one time. Regular contributions,

however modest, can add up over time. Investing

the same dollar amount regularly is also an eective

investment strategy to weather through the market

ups-and-downs, and may help lower the average

cost of your investment. Setting up an automatic

monthly contribution plan is a good way to build

your discipline in saving regularly.

Financial Advisors: An Overview

Working with a nancial advisor (FA) can have a tremendous impact on your nancial well-being. Knowing what

type of FA is right for your needs and preferences is important. But what’s the dierence between an agent, a

registered representative, a registered investment advisor, an investment executive, a wealth manager and a

nancial planner? Most investors don’t know. This section unlocks the mystery by providing an overview of the

three most popular types of FAs, the products and services they provide, how they are compensated, and the

“standard of care” they are held to in the handling of client/customer accounts.

Insurance Agents

Insurance agents are in the business of recommending and selling insurance and insurance-related investment

products to their customers. In general, there are two broad categories of insurance agents: independent

agents who represent several insurance companies and exclusive agents who represent only one insurance

company. In both categories, the agent acts as a representative or “agent” of the insurance company when

dealing with customers.

Regulation and Oversight

Insurance agents are regulated by the state(s) in which they do business. Agents who sell mutual funds or

variable annuities are also regulated by the Financial Industry Regulatory Authority (FINRA).

Legal Titles

Insurance agent, producer, producing agent

Non-legal Titles

Advisor, nancial planner, nancial advisor

Example Products Oered

• Fixed, indexed, and variable annuities

• Cash value, term, universal and variable life insurance

• Long-term care insurance

• Disability insurance

• Mutual funds (if properly licensed)

Compensation

Compensation is generally commission-based. The above-referenced products are examples of products that

generally pay a sales commission to the agent/advisor. Note: Certain insurance products allow the agent to opt

for an ongoing fee instead of an up-front commission.

Registered Representatives / Brokers

Brokers are legally referred to as registered representatives, meaning they are properly licensed and registered

to buy and sell securities for their customers through the company they represent. The company is known

as the broker/dealer. Brokers typically earn a commission when buying and selling securities inside their

customers’ accounts.

Registered representatives must have all buys and sells approved by the account owner before the transaction

can take place. This type of account is known as a “non-discretionary” account. This is why registered reps or

“brokers” are always on the phone with their customers making buy and sell recommendations and conrming

approval for each transaction.

Standard of Care: “Suitability”

The suitability standard means that the registered rep/broker has a regulatory obligation to have a “reasonable

basis for believing” that the recommendation or strategy is suitable for their customer based on their needs,

nancial situation, investment objective, risk tolerance, etc.

Regulation and Oversight

Registered reps/brokers are regulated by the state securities regulators in each state in which they do business.

They are also regulated by FINRA and the Securities and Exchange Commission (SEC).

Legal Title

Registered Representative

Non-legal Titles

Stockbroker (broker), nancial consultant and wealth manager

Example Products/Investments Oered

• Individual stocks and bonds

• Mutual Funds

• Exchange-traded funds (ETF)

• Initial Public Oerings (IPOs)

• Annuities and other insurance-related products - if licensed

Compensation

Compensation is generally commission-based. The above-referenced products are examples of products that

typically pay a sales commission to the registered representative.

Is a Registered Rep or “Broker” Right for You?

The answer could be “yes” if you agree with most of the following:

• You’re only interested in “buy” and “sell” recommendations from your broker.

• You have above-average investment knowledge and experience, and you like being involved with your

broker in making investment decisions.

• You want to authorize each buy or sell in your account prior to execution.

• You typically “buy and hold” your investments.

• You trade infrequently.

• Paying a fair commission is an acceptable way to compensate your advisor.

Registered Investment Adviser

Registered investment adviser (RIAs) provide ongoing advice to their clients. In general, RIAs use the same

investments oered by the registered representative. But instead of buying and selling investments for a

commission, investments are managed for an advisory fee.

A RIA can be a stand-alone independent rm or part of a large nancial institution. Advisors who provide advice

to their clients through their nancial institution’s RIA, are referred to as investment advisor reps (IARs). Most

large full-service brokerage rms have a registered broker/dealer unit and a registered investment advisor.

If properly licensed, a nancial advisor can be a registered representative, an investment advisor representative

and even an insurance agent all at the same time. This is referred to as being “dually licensed,” and is common

among nancial advisors working at large brokerage rms.

Standard of Care: “Fiduciary”

RIAs and IARs have a duty of loyalty and are obligated to act in the best interests of their clients without regard

to their nancial interests or other interests they may have. This is referred to as a “duciary” standard of care.

Any conicts of interests must be fully-disclosed up front. It is the highest standard of care in the nancial

services industry.

Unlike “non-discretionary” transactions that require registered representatives to have all transactions

approved by the customer prior to execution, RIAs may transact business on a “discretionary” basis. This means

they have authority and approval to buy and sell securities and to make other investment-related decisions on

behalf of their clients without receiving prior approval. Granting discretion to the advisor is part of the advisory

agreement and must be plainly spelled out.

Regulation and Oversight

RIAs are regulated by the State securities regulators or the SEC, depending on the size of the RIA.

Legal Title

Registered investment advisor (RIA) or investment advisor representative (IAR)

Example Products/Investments Oered

• Mutual fund “wrap” (fee-based) accounts

• Separately managed accounts or SMAs through outside investment management rms

• Individual stocks

• Individual bonds

• Exchange-traded funds (ETF)

Compensation

• Asset-based fee (a.k.a. advisory fee) typically stated as an annual percentage based upon the value of

the account

• Flat dollar amount based upon the size of the account or the complexity of the account

• Hourly rate billed monthly or quarterly

• Project retainer fee/monthly subscription

Is an RIA or IAR Right for You?

The answer could be “yes” if you agree with most of the following:

• You require or want ongoing advice

• You require or you are more comfortable with the duciary standard of care

• You require or want comprehensive reporting and performance measurement

• You require or want the advisor to make investment transactions on your behalf without you having to

authorize each transaction

• You are required to pay, or prefer to pay, a fee for services

Note: If you are a trustee or guardian who is responsible for the oversight and monitoring of investments for an

individual, organization or other entity, you may be required to work with a RIA or IAR who is obligated to the

duciary standard of care.

General Comparison

Item Registered Representative RIA or IAR

Other titles “Broker,” “Wealth Manager,” etc. “Advisor”

Transactions Non-discretionary trading Discretionary trading

Compensation Commission-based Fee-based

Standard of Care Suitability Fiduciary

Financial Planners (non-legal term)

“Financial planner” is not a legal term. It’s a description. In general, nancial planners are in the business of

developing comprehensive nancial plans for their clients. So an insurance agent, a registered rep, and a

registered investment advisor can all be “nancial planners” within the scope that their licensing permits.

Are Other Financial-Related Services Right for You?

While investment management is the primary service provided by most registered reps/brokers, RIAs and IARs,

many are credentialed experts who oer other important nancial-related services. These can include:

• College planning

• Financial planning

• Insurance planning

• Tax-ecient investment strategies

• IRA/retirement plan withdrawal strategies

• Legacy and generational planning

• Special needs planning

• Post-divorce planning

If you’d like one-stop access to these types of services through your nancial advisor, make sure your advisor

has the expertise to provide them to you. Just because your advisor has the ability to generate a plan or

report through their brokerage/advisory rm doesn’t mean your advisor is an expert. Having an advisor with

specialized training may be important to you.

Professional Designations

Some advisors choose to take specialized coursework in order to earn a professional designation. But not

all professional designations are created equal. Some require rigorous coursework over a several-month or

several-year period, while others can be acquired more easily. To evaluate a professional designation, follow

the checklist below. It only takes a few minutes to do, and the information will help you determine whether the

designation has any value or application to your nancial situation.

• Visit the website of the organization issuing the designation

• Know the prerequisites and coursework for obtaining the designation

• Know the continuing education requirements

• Know if an investor complaint or public disciplinary process exists

• Know if the designation has third-party accreditation

Some states require designations to be accredited in order to be used in their state. For more information

on professional designations, you can visit the FINRA website at www.nra.org, Tools & Calculators,

Understanding Professional Designations.

Finding Mr. or Ms. “Right”

Where do you start looking for the right nancial advisor for you? Sources for nding nancial advisors to

interview include:

• Brokerage/advisory rm websites. These websites allow you to locate a branch oce in your area.

Typically, the branch oce website posts the bios and credentials of the brokers/advisors in that oce.

• Organizations that issue professional designations. To learn about professional designations, visit the

FINRA website at www.nra.org and click on Tools & Calculators, then Understanding Professional

Designations. If you think a particular professional designation may be of value to your nancial

situation, visit the website of the issuing organization. Typically these websites allow you to search for

designation holders in your area.

Building Your Net Worth

What to Know

Calculating your net worth is easy: Assets – Liabilities = Net Worth. But your net worth is more than a number. It

represents the relationship between four factors:

1. Your Income

2. Your Monthly Expenses

3. Your Assets

4. Your Liabilities

To build your net worth, you need to be in control of all four of these factors.

What to Do

Review the stability and dependability of your earned income

To build your net worth, rst evaluate the stability and reliability of your earned income (e.g. your wages, salary

and bonuses if applicable). If you plan to build your net worth based on overly-optimistic expectations of salary

or wage increases, or the sustainability of a second job, you may fall short on meeting your wealth-building

goal. How stable and dependable is your current and near-term income?

Reduce your monthly expenses

In simple household terms, there are basically four types of expenses: xed (“have to”), variable (both “have to”

and “want to”), discretionary (“want to!”) and extraordinary (Murphy’s Law):

• Fixed expenses typically include necessities like your mortgage or rent payment, utilities, loans and

lease payments, and other xed monthly expenses.

• Variable expenses generally include things like gas, car maintenance, certain utilities, groceries,

clothing, school supplies and personal care.

• Discretionary expenses generally include things like specialty groceries and coee shops, dining out,

movies, theatre, concerts and club memberships.

• An extraordinary expense is the unplanned expense like a major car repair or a medical emergency.

To get a handle on where your dollars and cents go, track your spending over a two-month period. Tracking

your spending will help you identify the dierence between “have to” spending and “want to” spending that

when combined create a spending pattern that may impair your ability to build your net worth through a

nancially healthy and disciplined approach to saving and investing.

Acquire assets that are more likely to provide income or appreciation potential over the long term

What you own is called an “asset.” But not all assets are created equal. Some types of assets are more likely to

help build your net worth over the long term, while others may actually reduce your net worth. For example,

assets with income or appreciation potential may help build your net worth. Examples include: bank certicate

of deposits, treasury notes and bonds, real estate, individual stocks and bonds, exchange traded funds, and

mutual funds. Assets that may negatively aect your net worth over the long term are assets that are more

likely to depreciate in value. Examples include all sorts of material wealth items with a limited life span like

electronic equipment, cars, boats, snowmobiles and jet skis.

Maximize contributions to IRAs and employer-sponsored retirement plans

IRAs and retirement plans are great ways to accumulate assets with income or appreciation potential. For

employer-sponsored retirement plans, it’s generally recommended that you contribute a minimum of 15% of

your gross pay or the maximum amount allowed by the IRS. Many employers oer matching contributions. This

“free money” may contribute signicantly to the building of your net worth over the long term. Any employer

match is a 100% return on your contributed money and it doesn’t get any better than that!

Reduce your liabilities

What you owe is called a debt or “liability.” You create a liability when you decide to borrow money or use a line

of credit like a credit card. A liability isn’t payable immediately. Instead, it is typically payable at a future date or

over a longer time period with periodic payments. Some liabilities can act like a boat’s anchor that drags along a

lake’s bottom, slowing down your ability to build and grow your assets.

Like assets, not all liabilities are created equal. The types of things you have loans against can aect your net

worth over the long term. For example, loans on assets that have the potential to appreciate in value, or a loan

for college or trade school are dierent than from loans used to purchase depreciating assets or whose value

declines with age. For example, having a loan on a jet ski which is likely to depreciate in value, is dierent from

having a loan on a new home in a growing community, which is dierent from having a student loan for trade

school which may result in you earning a higher lifetime income.

When you swipe your credit card you create a liability. Strive to pay o the full balance on your credit cards each

month, if possible.

Final Notes

• Your net worth will naturally uctuate. Market-related factors may signicantly increase or decrease

the value of your assets, especially over the short term.

• Reducing your debt will have a positive eect on your net worth, and taking on new debt will have a

negative eect.

• Calculate your net worth annually and track your progress.

Where to Turn

For more information on building

your net worth, budgeting, credit

and debt, visit the Michigan State

University Extension website

www.msue.anr.msu.edu/program/

info/mimoneyhealth

Michigan State University

Extension helps people

improve their lives by bringing

the knowledge resources of

MSU directly to individuals,

communities and businesses.

The Health Insurance Mandate:

Get Covered or Pay a Penalty

What to Know

Health insurance, or health coverage, helps pay for doctor visits, hospital services and medications. You may get

health coverage through:

• Your employer

• A government program like Medicaid, Medicare or Veterans Health Care program

• A health insurance company directly

• A health insurance plan chosen on the Health Insurance Marketplace (www.healthcare.gov)

The coverage your plan oers will determine what doctors and hospitals you can use and how much you have to

pay. Check with your insurance company to better understand what services and doctors your plan will pay for

and how much each visit will cost (your copay).

Health Coverage Requirement

The “individual mandate” provision of the Patient Protection and Aordable Care Act (ACA) requires that

people obtain health insurance or pay a federal tax penalty.

If you currently have coverage from Medicare, Medicaid, through your employer, or you purchase coverage

for yourself, you are considered covered and will not pay a tax penalty. Furthermore, you may be exempt from

paying the penalty for not having coverage if you have a nancial hardship or if it would cost more than 8% of

your income to purchase coverage.

For more information on the health coverage requirement, visit: www.healthcare.gov/taxes or www.irs.gov/aca.

What to Do

Tips on How to Shop for Health Insurance

Health insurance for individuals and families is only sold during an annual open enrollment period. You can shop

for coverage in the Health Insurance Marketplace (www.healthcare.gov) or outside in the overall market. The

Health Insurance Marketplace is a website where individuals and small businesses may choose to shop for and

compare health coverage.

How to Buy Health Coverage:

• Through the Health Insurance Marketplace. Visit: www.healthcare.gov or call 800-318-2596.

• Directly from an insurance company.

• With the help of a licensed agent. Agents can help you buy coverage o the Marketplace and many can

help you buy coverage on the Marketplace.

• With the help of a federally trained navigator or certied application counselor.

Navigators and certied Application Counselors can help you sign up for a Marketplace plan with no

cost to you.

• From an online health insurance seller.

Things to Consider When Shopping for Coverage:

• Do your best to balance the cost (monthly premium) of a policy with the protection it oers.

• Determine what you will have to pay for covered services in a deductible, coinsurance, copayments, and

out-of-pocket limit.

• Determine what benets are covered without having to meet the deductible in advance.

• Determine the access to care.

Healthy Michigan Plan

Some Michigan residents may be eligible for the Healthy Michigan Plan, a health coverage program that began

on April 1, 2014. To be eligible for the Healthy Michigan Plan, you must be:

• Ages 19-64

• Not currently eligible for Medicaid

• Not eligible for or enrolled in Medicare

• Not pregnant when applying for the Healthy Michigan Plan

• Earning up to 133% of the federal poverty level (the federal poverty level is adjusted annually).

• A resident of Michigan

For more information, visit www.HealthyMichiganPlan.org or call 855-789-5610.

Where to Turn

Helpful health insurance websites:

www.healthcare.gov

www.michigan.gov/hicap

www.michigan.gov/difs

www.HealthyMichiganPlan.org

www.michigan.gov/MIBridges

enrollmichigan.com

www.irs.gov/aca

www.michagent.org

Life Insurance: Who’s Depending on You?

Life insurance provides a way for you to protect your family or other dependents against the economic loss that

occurs if you were to die. Life insurance can provide coverage for many things. For example:

• Replace lost income that your family will not receive as a result of your death

• Fund college education for dependent children

• Pay o a home mortgage and other liabilities

• Provide immediate liquidity for numerous expenses following your death

• Cover funeral expenses, end-of-life care and medical expenses

What to Know

There are four basic types of life insurance: term, whole, universal and variable. Listed below are their general

attributes. Actual terms and conditions will vary between insurance companies:

Term Life

• Provides coverage for a specied period of time, e.g., 10 or 20 years

• Annual premium typically remains level for that term

• Benet is paid only if death occurs within the covered term

• Typically used for income replacement

• The death benet is not taxed

Whole Life

• Provides lifetime coverage (assuming premiums are paid)

• Combines a death benet with a cash value element

• Premiums, death benet and cash values are stated in the policy illustration

• Guarantees are subject to the claims-paying ability of the issuing insurance company

• May allow for tax advantaged cash value withdrawal privileges

• The death benet is not taxed

Universal Life

• No guarantee that premiums will stay the same

• Provides lifetime coverage (assuming premiums are paid)

• Oers a death benet with a cash value element

• Part of the premium pays for insurance, and part is invested in a fund managed by the insurance

company

• Cash value earns interest at current market rates and the credited rate is determined or reset annually

• Must pay premiums for the cost of insurance or the cash value will be used

Variable Life

• Provides lifetime coverage (assuming premiums are paid)

• Developed to address the eects of ination on benets

• Part of the premium pays for insurance, and part is invested into sub-accounts selected by the policy

owner

• Death benets and cash values are “variable” and subject to the performance of the underlying

investment options

• Considered both an insurance product and a security (in Michigan it is an insurance product)

What to Do

Identify your coverage needs

Consulting with a licensed agent may be helpful in determining what your coverage needs are and the amount

of coverage you need.

Review the group life insurance options oered through your employer (if applicable)

You may be able to meet your coverage needs through group life insurance. In general, group insurance oered

through your employer may be less expensive than an individual policy. What you need to know:

• Baseline level of coverage available (typically at no cost to you)

• Options for additional coverage

• Cost for additional coverage (usually at a low group rate)

Note: Group life insurance is controlled by your employer, not you. If you leave your employer, your group

coverage is terminated. Many group policies are portable. This means you have the option of converting

your coverage to an individual policy or “porting” it to another group policy. You need to know if this option is

available to you.

If you are unable to meet your insurance needs through group life, you may want to consider buying individual

life insurance to ll your gap in coverage. An individual policy may provide the following benets:

• Fills the gap in your coverage needs

• Provides coverage during employment transition (if your group policy is not portable)

• Protects you against reductions to group policy coverage

• You control the policy, not your employer

Tips to Protect Yourself

• Conrm that the insurance company and the agent is licensed and registered by calling DIFS toll free at

877-999-6442 or by visiting www.michigan.gov/difs.

• The insurance agent has a regulatory obligation to make sure that you fully understand the policy. If

you don’t understand the policy or the application, don’t buy.

• Review the insurance application for accuracy before you sign.

• Never sign a blank application.

• When you pay your premium, always make the payment to the insurance company, not the agent.

• Know the “free-look” period on your insurance policy. Typically 10 to 30 days in length, this period gives

you time to decide whether you want to keep the policy, or cancel it without penalty.

• If the insurance policy you are purchasing is replacing an existing insurance policy, do not cancel your

current policy until the new policy has been delivered and you have reviewed it during the “free-look”

period.

Additional information regarding life insurance can be viewed at www.michigan.gov/difs under “Publications”

and “Guides.”

Long-Term Care Insurance: Is it Right for You?

What to Know

Long-term care insurance generally provides benets to a covered individual who is unable to perform two or

more of the following activities of daily living (ADL):

• Bathing

• Continence

• Dressing

• Eating

• Toileting

• Transferring (moving in or out of bed, chair or wheelchair)

Long-term care insurance generally provides for the following types of care:

• Nursing care

• Home health care

• Adult day care

• Respite care

• Assisted living

• Rehabilitation, and

• Hospice

Unlike health care insurance which is designed to provide medical services that promote good health and

treatments for illnesses and injuries that can lead to recovery, long-term care is designed to help individuals

maintain their physical and mental status quo in comfort.

Long-term care is expensive, and the cost of care continues to rise. Listed below are the median costs for

certain types of care in Michigan as of 2015¹:

Homemaker Services: $45,485 annually

This service makes it possible for individuals to live at home by helping them complete household tasks they

can’t do on their own. Homemaker services aides may clean house, cook meals or run errands.

Home Health Aides: $46,904

This service provides in-home care to individuals who need more extensive personal care than family or friends

are able to provide.

Adult Day Health Care: $20,800

This service is provided at a community-based center for individuals who need assistance or supervision during

the day but not around the clock. These centers may provide health services, therapeutic services and social

activities.

Assisted Living Facility: $39,000

These facilities are living arrangements that provide personal care and health services for individuals who may

need assistance with activities of daily living (ADLs). The level of care provided is not as extensive as that which

may be provided in a nursing home.

Nursing Home Care: Semi-private room: $90,703 Private room: $99,098

Nursing home care is for individuals who may need a higher level of supervision and care than in an assisted

living facility. They oer residents personal care, room and board, supervision, medication, therapies and

rehabilitation, as well as skilled nursing care 24 hours a day.

¹Source: 2015 Genworth Cost of Care Survey for Michigan

Note: Long-term care coverage is available even if there are pre-existing conditions; however, the insurer may

implement a six month pre-existing condition waiting period. Coverage denial is possible based on the health

status of an individual.

What to Do

When considering whether long-term care insurance is right for you, ask yourself these questions:

Does my family have a history of debilitating disease?

• Have any of my family members required long-term care services?

• If I were to need long-term care, do I have adequate assets to cover the costs out-of-pocket?

•

Can I aord the premium? Would I still be able to pay my mortgage, car payment and other essential expenses?

Other Things You Can Do:

• The insurance agent has a regulatory obligation to explain the policy to your level of satisfaction. If you

still don’t understand what the agent is explaining, call DIFS for clarication.

• Compare policies between at least two companies and agents.

• Ask your agent for the issuing company’s personal worksheet which will show premium information and

the rate increase history for the policy, if any.

• Understand the “benet triggers” of the policy. Benet triggers describe the criteria the insurance

company uses to decide whether you are eligible for benets.

• Always make the premium payable to the insurance company, never to the agent. Review the policy

during the 10-day “free-look” period to conrm the policy is right for you. If not, return the policy to the

insurance company during the “free-look” period for a penalty-free premium refund.

Note: Medicaid typically covers long-term care at specic facilities once an individual qualies. Most people will

have to start paying for long-term care out of their own money and “spend down” their income and assets until

they qualify for Medicaid. For more information on Medicaid, contact the Department of Health and Human

Services at 800-642-3195.

Where to Turn

For more information on long-term care insurance, visit www.michigan.gov/difs and look under “Publications”

and “Guides” for these helpful references:

• Long-Term Care Writers in Michigan

https://www.michigan.gov/-/media/Project/Websites/difs/Insurance_List/Long-Term_Care.pdf

• Long-Term Care Insurance: What is long-term care insurance and how do you decide if it is right for

you?

https://www.michigan.gov/-/media/Project/Websites/difs/Publication/Health/FIS-PUB_5500.pdf

•

Long-Term Care Insurance: What You Should Know content.naic.org/cipr-topics/long-term-care-insurance

• Long-Term Care Insurance Fact Sheet www.naic.org/documents/prod_serv_consumer_ltc_lp.pdf

Planning for Retirement

What does the future hold for you 20 or 30 years from now? Whatever it is, you’ll likely need money to pay for it.

That means you need to save today to pay for tomorrow.

What to Know

It’s generally accepted that you’ll need to replace approximately 70 to 100 percent of your pre-retirement

earned income to cover your living expenses during your retirement years. While Social Security may provide

minimum benets, most of your income sources during retirement will come from what you saved during your

working years. It’s on you to save.

What to Do

How do you save more? The answer is easy: spend less or make more. It’s the “doing it” that gets a little

challenging. Here are four easy tips that may help you save more:

1. Pay yourself rst

• Contribute to your employer-sponsored retirement plan or IRA. For employer-sponsored retirement

plans, it’s generally recommended that you contribute a minimum of 15% of your gross pay, or the

maximum amount allowed by the IRS.

• Build up a saving account that ultimately equals 3 to 6 months of your earned income. This will help pay

for unplanned expenses or periods of un/under-employment.

2. Reduce spending

• Take a critical look at your xed expenses. Find ways to reduce expenses that are unnecessary or nd

alternatives that are less expensive.

• Reduce frivolous or impulse buying. For a real eye-opener, track your expenses for a month or two. It

may surprise you how much you’re spending on things that oer no value, or on things you don’t even

remember buying! Think before you spend.

3. Earn more money

• Don’t get “stuck in a rut” at work. Look for ways to maximize what you earn for the skills or talents you

oer. Keep on the lookout for new employment opportunities or advancement within your company or

organization.

• If feasible, taking a second job is a great way to increase your savings potential. It’s an extra bonus if

your second job is doing something you enjoy.

4. Make more money

• Evaluate how your employer-sponsored retirement plan account is invested. If you are in your 30s or

40s, are you allocating among investments that oer the most potential for growth based upon your

investment time horizon, objective and risk tolerance?

Final Note

Plan and act on what you know and what you can control. Be careful with projections and assumptions about

the future. Your assumptions may mislead you into being either overly-optimistic or overly-pessimistic about

your future which can lead to saving and planning decisions that could negatively aect the quality of your life

during retirement.

Where to Turn

For more information on the importance

of saving and creative ways to save, visit

the following websites:

http://www.smartaboutmoney.org

Hover on “Your Money” and under “I’d

like help on,” choose “Ways to Save

Money.”

Smart About Money is a program of

the National Endowment for Financial

Education (NEFE), a nonprot national

foundation dedicated to inspiring

empowered nancial decision making for

individuals and families through every

stage of life.

http://publications.usa.gov Click on

“Money” under “Categories” then click

on “Investing & Saving” under “Money

Categories.” There are lots of helpful

brochures.

The Publications.USA.gov website is

where consumers can go to get accurate,

complete and concise government

Mirror, Mirror on the Wall—Will I Have Enough Money to Retire at All?

Nearly half of Americans will run short of money in retirement, according

to a recent report from the Employee Benet Research Institute (ERBI)

. On

which side of the divide are you? The only way to know is to take a hard look

at where you stand now and how far you need to go to reach your retirement

goal.

Here’s a rough rule of thumb: If you need $50,000 a year to live on in

retirement, your retirement nest egg should be in the ballpark of $750,000

to $1 million. Assuming you also have Social Security, your money should

last for 30 years in retirement, at a withdrawal rate of 4 percent per year,

depending on your investment returns.

Naturally, the closer you are to retirement, the more you’ll need to save

to reach your goal. You may even have to face the dicult reality that you

aren’t likely to get there and need to explore alternatives to make up the

shortfall. For example, can you bridge from work to retirement in stages

so you continue to generate income from your job for a few more years?

What skills and experience could you bring to a part-time job or your own

business during retirement? Do you have a second property that could be

converted to a rental to produce income? If you are married (or were married

for at least 10 years in the past), have you evaluated the best strategy for

taking your or your spouse’s Social Security benets?

With the help of a competent, trusted nancial advisor, you likely can

cobble together a comfortable retirement even when your nest egg falls

short of the ideal.

Source: Fast Facts, “How Many Will (Not) Run Short in Retirement,” EBRI, March 6, 2014, #271.

information when, where, and how they want and need it to make important life decisions.

http://msue.anr.msu.edu/program/info/mimoneyhealth

Michigan State University Extension helps people improve their lives by bringing the knowledge resources of

MSU directly to individuals, communities and businesses.

_____________________________________________________________________________________________

Notes

The publication of this toolkit was made

possible with generous support from:

Community Bankers of Michigan