A comprehensive new financial guide

SocialTwist Tell-a-Friend
Elliot Raphaelson

Jonathan Clements has been a financial columnist for the Wall Street Journalfor many years. His new book,Jonathan Clements Money Guide 2015, is a comprehensive financial guide to the important decisions that influence your family’s long-term financial well-being. Informative, concise, up-to-date and easy-to-understand, the book encompasses investing, retirement planning, estate planning and many other personal finance issues.

On the subject of investing, Clements covers well-trodden ground. He advocates a diversified portfolio that includes stocks, bonds and alternative investments such as real estate investment trusts.

He stresses the importance of minimizing costs and discusses the advantages of using index mutual funds and exchange-traded funds (ETFs). This is standard advice but explained well. His sample portfolios and advice on selecting financial advisers are very useful.

Healthcare and retirement advice

An important chapter of the book covers various aspects of health insurance, including the Affordable Care Act, Medicare, Medicaid, prescription drug coverage and Medigap insurance.

Clements is very informative on the pros and cons of long-term care insurance and on nursing home costs. Many studies have shown that a significant number of families are woefully ignorant regarding long-term care issues and have not done adequate long-term planning in this area. Clements goes into detail explaining available options.

The book includes tools that will allow you to estimate whether you are saving enough to have a prosperous retirement. Clements discusses Social Security benefit options in great detail, including topics I have covered in prior columns, such as the “file and suspend” option, which allows you to postpone benefits up to age 70 while your husband or wife can still claim spousal benefits.

Clements discusses the advantages of immediate annuities, which guarantee lifetime monthly benefits, and of longevity insurance, which provide higher guaranteed income if you are willing to wait until a later age to initiate payments.

Clements discusses the advantages and disadvantages of reverse mortgages. He doesn’t rule them out, despite their high fees and lack of flexibility, with the proviso that this option is a “last resort.” That’s sound advice, as I have indicated in prior columns.

On the subject of taxes, Clements points out the importance of knowing your marginal rate. (This is the income tax rate you pay for the last dollar you report as income.) Knowing this rate will allow you to know whether to buy municipal bonds, pay down your mortgage, and fund Roth retirement accounts (rather than tax-deductible accounts).

As you might expect, Clements recommends putting as much as you can into tax-sheltered accounts. If you are not eligible for a tax-deductible investment, or Roth IRA, you can fund a nondeductible IRA and subsequently convert it to a Roth.

He is a big proponent of Roth accounts. You should use your retirement accounts to buy your portfolio’s tax-inefficient investments such as taxable bonds, real estate investment trusts and actively managed stock funds. Your taxable accounts can be used to hold municipal bonds and investments that have low turnover, such as index mutual funds and exchange-traded funds.

Learn about estate planning

A useful chapter is devoted to estate planning issues, including key components such as wills; correct naming of beneficiaries for retirement accounts and life insurance and correct titling on major assets; trusts; financial and medical powers of attorney; and steps to reduce taxes.

The author points out that it is very important to be sure to name the correct beneficiaries on your retirement accounts. The provisions in your will do not override the beneficiaries you named in your retirement accounts. Make sure that after any significant events, such as divorce, you immediately update the beneficiaries specified on your accounts.

Money Guide 2015 could be a very comprehensive asset for your long-term financial planning. Consider it as a gift to anyone you know lacking in knowledge regarding basic personal finance issues.

Elliot Raphaelson welcomes your questions and comments at elliotraph@gmail.com.

© 2015 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.