Achieving Diversity in Your Investment Portfolio

Achieving Diversity in Your Investment Portfolio

By Richard F. O’Boyle, Jr., MBA, LUTCF

As you approach retirement, and even during retirement, you want to diversify your portfolio to protect what you’ve earned and to grow more. Getting to this point wasn’t easy so you will need to exercise caution. But you likely want to achieve real growth in the next few years, to maximize your enjoyment during retirement, and to leave something behind for the ones you love. I’ve laid out some of the best ways you can do both. By engaging in some safe and secure allocations, you’ll protect your funds from the whims of time. By taking on some risk, you’ll stand a greater chance of adding to the wealth you’ve already accumulated.

1)    Bonds. Bonds are a relatively stable form of investment. In effect, when you buy a bond, you are lending money to an entity (Federal government, state, municipality or corporation) and will recoup the loan plus interest over the duration of the bond’s term. Federal government bonds have never defaulted in the history of the United States. What’s more, your bond money will generally grow in value faster than the present rate of inflation. Therefore, you won’t lose buying power, while increasing your wealth slightly. Unfortunately, there is a payoff for the security that bonds provide. Just as there is little risk or loss, there is little hope of large gains on this kind of investment. As you age, you’ll want to allocate more and more of your portfolio in secure bonds, but you also want to leave yourself a little wiggle room to grow. This is where the other kinds of investment come in.

2)    Stocks/ETFs/Mutual Funds. If you have invested at all, you likely know about these. These are the riskier cousin to bonds. Buying stocks is buying a little share in a company – which allows you to benefit from the growth of that company. By spreading out your investment across many stocks, through index mutual funds, you will follow the historical upward trajectory of the market overall. Of course, sometimes the market drops and, when it does, your investment will decline with it. But generally, the market grows over the long term. If you expect to have many years or even decades ahead of you, a significant allocation of stocks may be appropriate. You may even be comfortable with more than average. Wisdom typically dictates that you have your age reserved in bonds (a 45-year-old will have 45% of her portfolio in bonds). The remaining amount will be in stocks, or spread out in other kinds of investments.

3)    Binaries, Real Estate, and Alternatives. Spread Betting is a quick way to see return on your investment. It is the quickest way, actually, though caution is urged because you can see a loss just as easily. Other common investment forms like Real Estate and investment in specific business enterprises are less risk-prone, but do not offer the same speed of return as spread bets. Some people feel comfortable investing in gold and other static commodities. While it is impossible to anticipate how something like gold will change in value, its inherent worth is comforting to those who don’t have the same understanding of the stock world.

A diversified portfolio, properly stocked, will carry you through your retirement in comfort and security. Talk to your financial professional about the above options, and about how to best implement your retirement portfolio for your personal needs.

Divorce and Life Insurance

by Richard F. O’Boyle, Jr., LUTCF, MBA

Divorce is never easy. It is an emotionally taxing experience, but may be an opportunity for a new beginning. There are so many minor details that need to be ironed out between the two parties that some are bound to get overlooked. Life insurance is an important aspect that many people might not think about until it’s too late.

Divorce Decree

When you purchase life insurance, the goal is to make sure your family is provided for in the event of your death. It’s important that the life insurance is addressed in the divorce decree and the proper language associated with it.

You and your soon to be ex-spouse need to come to an agreement on what you plan to do and what your options are. The odds are your spouse is the beneficiary of the money. While you most certainly make changes to your will after a divorce, remember that beneficiaries on a life insurance policy can only be changed by filing a new beneficiary with the insurance company.


In many cases, the divorce decree will spell out one partner’s financial obligations to the couple’s children. These may include a requirement to provide financial child support, health insurance coverage, college funding or assistance of other sorts until the children reach a certain age. Just as with a married couple, life insurance would provide a ready financial asset in the event that the individual dies prematurely. Some planners would calculate the value of these obligations and obtain a term life insurance plan (or repurpose an existing plan) that would cover this amount.


As married couple accumulate assets over time, at the time of divorce those assets are usually split up. The cash values in a permanent life insurance contract are assets just as a house, retirement plan or ownership in a business. Keep in mind that permanent life insurance has very specific tax rules associated with it – which can be a curse and a blessing.

Transfer of Value and Taxation


When you transfer the value of your life insurance to another party, the government says that the death benefit is now taxable. This is called the “transfer for value” rule. Life insurance death benefits are generally federally tax free, but people were taking advantage of this by continuously transferring the policy and reaping the benefits.


The rule has been adjusted so that divorcing parties are not subject to the transfer for value rule: The recipient spouse will have a cost basis in the policy equal to the net premiums paid by the transferor spouse. So while the death benefit might not be fully tax free, it will depend on how much in premiums were spent over the previous years. It’s wise to speak with your attorney about the specifics of your case and relevant state laws (which may vary considerably).


If the divorcing partners have significant assets, including the value of life insurance death benefits, they may be subject to federal and state estate taxes. This can be extraordinarily complicated and is not the subject of this article.


It’s a good idea to keep a policy in force until all of the details have been worked out: don’t jump the gun and cancel a policy to buy a new one. You may not be getting the best rate and in some cases may even be uninsurable. For this reason, make sure that you have a good grip on exactly what coverage you have, and what coverage you will need.


Designating Beneficiaries


If children are involved, you should carefully consider whom to name as the new beneficiary. Minor children who receive life insurance proceeds may wind up with the ex-spouse as their guardian – and controller of the inheritance. This may not be in synch with your wishes.


It’s not uncommon to place a life insurance policy into an irrevocable life insurance trust so that you can spell out how the death benefit will be paid out after you die. A trust is an entity that is managed by a person or group of people to manage the trust’s assets according to the guidelines spelled out in the trust’s founding documents. For example, if your children are very young and can’t handle suddenly having several hundred thousand dollars, you can make the trust the beneficiary. The trustees would ensure that the children get enough money for college, health or even vacations. The children or your ex-spouse can’t touch the money without the trustees’ approval.


You should also address the possibility of a future spouse and their claim to the insurance. If children are not involved, you can negotiate taking your current spouse off and either canceling the policy or changing to a different beneficiary. Your spouse may want to fight you on this, especially if they stand to get a significant amount of money, but it should be hammered out in the divorce decree.


Divorce can be a messy business and hardly anyone leaves it with exactly what they want, but the key is compromise. This goes for life insurance claims as well. You and your ex-partner need to agree on what to do and have it written into the decree. You may not get what you want and your partner may not get what they want, but the decisions need to be made.


If you have no children, you may want to consider simply canceling the policy and getting another one for yourself when the time is right. The goal of life insurance is to provide financial stability in the event of your death. Since your spouse will no longer be your spouse, you may be under no legal or moral obligation to provide for them after your death.

Year End Retirement Tips 2013

by Richard F. O’Boyle, Jr., LUTCF, MBA

As another year winds down – and another begins – it behooves us to take a look at our current retirement plans and make necessary adjustments.

Retirement Plan Contributions for 2013

You may have limited time to maximize your retirement plan contributions for the tax year 2013. Most people can stash money into traditional IRAs and Roth IRAs as late as April 15, 2014 (for tax year 2013), but some plans have to be filled before December 31, 2013.

The annual limit for traditional IRAs and Roth IRAs is $5,500 for 2013 ($6,500 if you are over age 50) – and must be deposited by April 15, 2014. Company-sponsored and Union/Non-Profit plans such as 401(k), 403(b) and 457 plans allow 2013 contributions up to $17,500 or $23,000 (age 50+).

If you have not yet maximized your 401(k) contribution for this current year, you may want to change your contribution percentage before the end of the year. You can increase the percentage of your salary that is contributed (and reduce your take-home pay). Contributions to deferred plans reduce your current taxable income.

Retirement Plan Contributions for 2014

The IRS has left retirement plan contributions for 2014 at the same levels as 2013. But the thresholds for qualifying for Roth IRAs is increasing slightly. If your adjusted gross income is less than $129,000 (for singles) or $191,000 (for married persons filing jointly) then you are eligible to contribute to a Roth IRA. Eligibility starts to phase out if you earn more than $114,000 (singles) and $181,000 (couples).

Year-End Tax Strategies

If you want to reduce your taxable income for 2013, you may consider paying off more expenses that you can deduct. For example, some people will prepay their real estate taxes, homeowner’s insurance premiums or make mortgage payments in advance that would normally be due in early 2014.

Deductions for Medical Expenses

For 2013 the amount of medical expenses required to reach the deductible threshold has increased for people under age 65.  You must have medical expenses greater than or equal to 10% of your adjusted gross income in order to be able to deduct them. People aged 65 and older only need expenses of 7.5% through 2017.

Health Insurance Individual Mandate

Beginning in 2014, individuals are required to carry health insurance either through their employer or individually. In order to set an individual plan in place for a January 1, 2014 effective date, people shopping on the government Insurance Marketplace (http://www.healthcare.gov) and for New Yorkers (http://www.nystateofhealth.com) must sign up for (and pay for) a plan by December 23, 2013. The actual mandate kicks in March 31, 2014.

Health Savings Account Contributions

If you have a high-deductible health insurance plan that includes a tax-preferred Health Savings Account, you can still maximize your contributions for 2013. The contribution limit for 2013 is $3,250 for individuals and $6,450 for families. The maximum takes into account both employer and employee contributions to the HAS. For those 55 and older the maximum is increased by $1,000.

Social Security and Medicare in 2014

The Social Security Administration will increase benefits by 1.5% in 2014. Medicare Part B premiums will remain at $104.90 per month, but high-income individuals will see the surcharge for Part B and Part D increase slightly.