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Investment Options

Understanding Your Choices

Saving for retirement is a simple (and smart) idea. But with so many investment options available, where do you start? First, learn the basics. Then, talk to an advisor about which options could fit into your retirement plan.

client reviewing, learning and understanding the many investment options to choose from at BOK Financial.
  • 10%

    Over nearly the last century, the stock market's average annual return is about 10 percent, before inflation. 1

  • 44%

    Forty-four percent of Americans between the ages of 60 and 70 have a mortgage when they retire. 2

  • 47.9 million

    47.9 million U.S. households own at least one type of IRA as of 2019. 3

401(k) Plans

A traditional 401(k) is a retirement savings plan sponsored by an employer. It lets workers put a portion of their paycheck, before taxes are taken out, into certain investments as offered by the plan. Taxes aren’t paid until the money is withdrawn from the account.

The Pros

  • Easy savings: 401(k) contributions come out of your check before you see it. So you won't really miss them.
  • More savings: You can invest 100% of each dollar since that money is taken before taxes. If you tried to invest that same dollar after taxes, you wouldn’t have the full dollar to invest — just what’s leftover after the IRS takes its cut.
  • Free money: Many employers will match a portion of your contributions. That’s money for your retirement that you didn’t have to save.
  • Tax-free growth: Uncle Sam can’t touch your 401(k) until you let him. The money you put in, and the money you earn there, is tax-free until you start making withdrawals.
  • Lower income taxes: Pre-tax contributions to your 401(k) lower your total taxable income for the year, which lowers your income taxes.
  • Emergency withdrawals: You may be able to borrow from your 401(k) in the event of an emergency or financial crisis. Note that interest may be charged on any loans taken.

The Cons

  • Plan fees: Somebody has to manage and administer your 401(k), and they don’t work for free. As a plan participant, you pay a fee to help cover those costs.
  • Limited investment options: When putting your money into your employer’s 401(k) plan, you can only invest in the options that are a part of that particular plan.
  • Possible waiting periods: When starting with a new employer, you may have to up to a year before they’ll allow you to participate in their 401(k) plan.

What's a Roth 401(k)?

A Roth 401(k) is like a traditional 401(k) that just gets the taxes out of the way, right away. Contributions from your paycheck are made after taxes, not before. That means you won’t be taxed when you start taking distributions. If you're in a low income bracket now (perhaps just starting out) but think you'll be in a higher tax bracket at retirement, a Roth 401(k) could make a lot of sense.

Did you leave a 401(k) at an old job? Learn about your options.

Traditional IRA

A traditional IRA (Individual Retirement Account) is a tax-deferred retirement savings account. You pay taxes on your money only when you make withdrawals in retirement. That means all of your dividends, interest payments and capital gains can compound each year without being decreased by taxes, which may help your IRA to grow faster than a taxable account. This can be an attractive option for people who expect their tax bracket in retirement to be lower than their current tax bracket.

The Pros

  • You're in control: You decide where to open your IRA and you choose the investment options within your IRA. The options you have available to you will depend on where you open your account, but you can easily choose and change the asset allocation within your IRA.
  • More options: Generally, IRA investors get more investment options than 401(k) investors.
  • No income limits: Anyone with earned income (no matter how much or how little) may contribute to a traditional IRA.
  • Not employer dependent: Since IRAs are not employer-sponsored, it doesn’t matter where you work. IRAs are a popular choice for full-time and part-time workers with no 401(k) option at work.

The Cons

  • Lower contribution maximum: The maximum you can contribute to a traditional IRA in 2021 is $6,000 ($7,000 if you’re age 50 or older).
  • Lower contribution rate: IRAs have a low contribution rate, which may not be enough for those beginning an IRA retirement plan later in life.
  • Contributions aren't always deductible: If you have access to a workplace retirement account such as a 401(k), contributions to an IRA may not be deductible. The rules are complicated and depend on your workplace, your income, and your spouse’s workplace and income. An advisor can walk you through the specifics.

What's in an IRA?

An IRA is not an investment in itself. It’s an investment account. It can be made up of a variety of investment vehicles including stocks, bonds, mutual funds, and CDs.

Roth IRA

A Roth IRA is a tax-advantaged individual retirement account. Your contributions are made after tax, which means there’s no initial tax benefit. But that money and your investment earnings grow tax-free, meaning there’s no income tax on Roth IRA withdrawals in retirement. This is can be an attractive option for people who expect their retirement tax bracket to be equal to or higher than their current tax bracket.

The Pros

  • More options: Like a traditional IRA, Roth IRAs tend to offer more investment options than 401(k) investors.
  • Tax-free compounding: Qualified withdrawals from a Roth IRA are 100% tax-free, no matter how much your account has grown. This basically lets you “lock-in” your current tax rate (which is great if you expect your income to rise in the future).
  • No maximum age to contribute: You can contribute to a Roth IRA at any age.
  • No required minimum distributions: Traditional IRAs require minimum distributions based on the IRA owner's life expectancy be taken after the owner turns 72 (age 70 ½ if you attained age 70 ½ before 2020). Roth IRAs don't have any minimum distribution requirements during the account owner's lifetime (which can make them an excellent estate-planning tool).

The Cons

  • Income limits: Everyone can contribute to a traditional IRA, regardless of income. Roth IRAs, however, have limits on the amount of income you can make and still contribute.
  • No immediate tax deduction: While traditional IRA contributions may be deductible in the tax year in which they were made, Roth contributions are not.
  • No employer match: Your Roth IRA is independent of your job, so your employer won’t match any contributions.

Can I pass it on?

Yes. Since Roth IRA account holders are never forced to withdraw money, you can pass along the account to your heirs. The account balance can stay invested and your heirs will pay no income taxes on their inherited Roth IRAs (but they will be required to take distributions over their lifetimes).


An annuity is a contract between you and a third party — usually an insurance company — in which you make a lump sum payment or a series of payments. In return, you get a monthly stream of income for a fixed period or for life. The income can start now (immediate annuity) or in the future (deferred annuity).

There are two main types of retirement annuities: fixed and variable. With a fixed annuity, you’ll know ahead of time how much you’ll receive once the insurer starts making payments back to you. That’s because the rate of return is fixed for a predetermined number of years.

With variable annuities, your return is based on the performance of a basket of stock and bond products, called sub accounts, that you select. This gives you a bigger opportunity for growth compared to a fixed annuity, but also more risk.

The Pros

  • Income for life: While some annuities are for a certain period of time, lifetime annuities offer income you can’t outlive. For people with more modest means, an annuity ensures you’ll have something to supplement Social Security no matter how old you get.
  • Guaranteed rates: While payouts from variable annuities depend on how the market performs, fixed annuities provide a predictable income stream because you know what your rate of return will be for a certain period of time.
  • Deferred distributions: Annuities enjoy a tax-deferred status like IRAs. You won’t pay taxes until you withdraw the funds. Leaving money in a deferred annuity can also help reduce your Social Security taxes, as you have less taxable income when you delay withdrawals.

The Cons

  • Fees: When compared to mutual funds and CDs, annuity fees can be costly. Commissions, annual expenses, and riders to increase your coverage can add up quickly.
  • Higher tax rates: When you take withdrawals, any net returns you receive are taxed as ordinary income. Depending on your tax bracket, that could be a lot higher than the capital gains tax rate. Younger investors might consider maximizing their 401(k) plan IRA before putting money into a variable annuity.
  • Lack of liquidity: With many annuities, if you try to take a withdrawal within the first few years of your contract, you could pay a hefty surrender fee. Surrender periods can last between six to eight years, although they’re sometimes longer.

Why buy an annuity?

Annuities are complex, and they’ve gotten some bad press. But the bottom line is annuities do one thing really well: provide a hedge against longevity risk (the risk of living far longer than you thought you would). If that is your goal, then considering an annuity as part of your overall retirement plan may be the right move for you.


Stocks, also known as shares or equities, are the unit of investment in individual companies. If you own stock in a company, you own a proportional share of that company’s dividends and net assets.

Traders and investors trade (buy and sell) a company's stock on a stock market (such as the New York Stock Exchange or the Nasdaq) based on the perceived value of the company, which changes over time. This buying and selling, plus company performance, conditions in the marketplace, and a wide range of other factors can push the price of a particular stock up or down. Investors can make or lose money depending on whether their perceptions are in agreement with the market.

The Pros

  • Higher return potential: Stocks typically have potential for higher returns compared to other types of investments over the long term. Historically, they have outperformed most other investments over the long run.
  • Dividends: Some (not all) stocks pay dividends, which can provide extra income and can also help offset a drop in share price.
  • Capital appreciation: Companies that perform well can become more valuable in the eyes of the market. This increases the price of the company’s stock. If the value of your stock increases over time, you can sell the shares to another investor and realize a profit (known as a capital gain).

The Cons

  • No guarantees: While stocks can offer great potential, they come with risk. There is no guaranteed return on your investment and no guarantee you’ll get your original investment back either. You can make or lose money when purchasing stocks. Past performance of stocks is not indicative of future results.
  • Volatility: Stock prices can rise and fall dramatically. These fluctuations in price impact the value of the stock you own. If the price is lower than what you paid, you’ve lost money.

Why do companies offer stock?

Companies first issue stock in an Initial Public Offering (IPO). They do this to raise money for various things such as paying off debt, launching new products, funding expansion, and more. After the IPO, the stock that was made available is bought and sold by investors through the stock market.


A bond is similar to an I.O.U. When you purchase a bond, you are lending money to the “issuer” of the bond (typically a government, municipality, corporation, or federal agency). In return for that money, the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it comes due.

The Pros

  • No market risk: If bought and held to maturity, you are not affected by market risk. Regardless of the market, you will get the specified rate of interest and the repayment of the bond’s face value. (If you sell prior to maturity, the price you get will be dictated by the market).
  • Liquidity: Generally, you can sell a bond prior to maturity on the secondary market. U.S. Treasuries are typically the most liquid (easiest to sell) type of bonds.
  • Less fluctuation: Bonds tend to rise and fall less dramatically than stocks, which means their prices may fluctuate less.
  • Steady income stream: In general, bonds can provide a level of income stability.

The Cons

  • Higher taxes: Interest payments from bonds are taxed higher than other investment income. It is based on the tax rate you pay on your regular income. As a result, it has the potential to be very high based on your earnings.
  • Locked-in interest: While this is good if rates go down, if interest rates go up, you’ll be stuck with the lower rate set at the purchase of your bond.
  • Limited risk means limited returns: While the return is fixed, it is limited compared to other, riskier, investment options. For example, bonds have historically provided lower long-term returns than stocks. Past performance of bonds is not indicative of future results.

What are junk bonds?

A junk bond is exactly the same as a regular bond, except that they are from issuers with lower credit ratings. This means the issuer carries a higher-than-average risk of defaulting on the bond. However, this higher risk means the bonds are offered with much higher yields. Because of their lower credit rating, these companies must offer investors higher yields in order to attract buyers. Despite their name, junk bonds can be valuable investments for informed investors that understand their potential high returns come with the potential for high risk.

Managed Account Solutions

A managed account, also called a managed money plan or managed portfolio, is an investment account owned by an individual investor (typically a high-net-worth individual) that is overseen by a professional money manager. These accounts are personalized investment portfolios. They are designed and managed to meet the specific goals of the account holder.

The Pros

  • Hands-off investing: Day-to-day management of your portfolio is handled by a professional money manager who must, by law, act in your best interest. Ideal for those who lack the time or expertise to build a well-diversified portfolio that meets their long-term goals or those who would like professional help with their investment decisions.
  • Known costs: In exchange for professional management and oversight, investors typically pay a set annual fee based on the account balance they have in the portfolio.
  • Fund expenses: Managed portfolios often have access to fund share classes generally unavailable to mainstream investors. These share classes — typically reserved for people who invest, say, more than $1 million in the fund — charge lower fees than regular share classes. Those savings are passed along to the portfolio’s investors.

The Cons

  • Not hands-on: What is a benefit to some is a drawback to others. Some investors may prefer to design their own portfolio and play a more active role in managing their portfolio.
  • Risk: A managed account may not make sense for investors who are completely risk averse and thus prefer savings options. Even when invested conservatively, managed accounts are not insured or guaranteed from loss.

How is this different than a mutual fund?

Mutual funds are classified by investors’ risk tolerance and the funds’ investment objectives. They do not take into consideration individual preferences. A managed account, on the other hand, is driven exclusively by the individual investors preferences and goals.

With a mutual fund, your money is co-mingled with others. You own a percentage of the value of the fund, not the fund itself. With a managed account, your manager purchases and places physical shares of securities in the account. You own the securities.

In addition, shareholders in mutual funds have no control over when capital gains are realized. They owe taxes on capital gains when portfolio managers sell underlying stocks for a profit. In a managed account, the manager has the ability to offset gains and losses by buying and selling assets when it is the most tax-efficient time to do so. This may result in little or no tax liability.

Customized Portfolio Solutions

The Customized Portfolio Solutions program from BOK Financial Advisors is an investment advisory service offering investors personalized portfolios of mutual funds, exchange-traded funds (ETFs), and separately managed accounts (SMAs). Acknowledging that historic results suggest your asset allocation strategy (how you allocate your assets among stocks, bonds, alternative investments, and cash) is the single-greatest contributor to long-term performance, our program centers around a proprietary asset allocation program. This in-depth process seeks to increase investment return potential while tempering risk.

The Pros

  • Diversification: The Customized Portfolio Solutions program can provide diversification by investing across multiple asset classes, market segments and sectors, investment styles, and strategies.
  • Custom tailored: We take the time to understand your objectives and carefully craft a personalized investment strategy targeted to your specific goals and risk preferences.
  • Professional management: From creating and calibrating your strategy to managing your specific investments, you’ll have a team of experienced investment professionals on your side, seeking to enhance your portfolio performance and reduce risk.
  • Diligent oversight: Our Strategic Investment Advisors team regularly reviews all investment managers included in the program to ensure they meet our program guidelines and performance criteria.
  • Peace of mind: BOK Financial Advisors serves as fiduciary for all Customized Portfolio Solutions program clients, meaning we make your financial interests our priority.

The Cons

  • Hands-off investing: Our Customized Portfolio Solutions program includes ongoing management review and oversight efforts — in addition to regular monitoring of your portfolio — to make sure the program offers suitable strategies while maintaining a prudent balance between risk and reward potential. We will rebalance your portfolio to make sure your investment strategy continues to align with your objectives and goals. While this is a benefit to many, some investors may prefer to design their own portfolio and spend the time to actively monitor and manage it.

Why BOK Financial Advisors?

Among the many factors that characterize our approach, we believe two features distinguish our manager selection process:

  • We are unbiased: When screening for the most attractive investment options within a specific asset class, sector, or style, we don’t limit our choices to a single firm. Instead, we open our selection process to the broad investment universe, fostering true open architecture.
  • We blend investment styles: We recognize the specific benefits of active and passive management styles and offer both in our platform, understanding how they complement each other in well-rounded portfolios.

Long-Term Care Insurance

Long-term care insurance (LTCI) is insurance coverage designed to take care of you in a setting such as a nursing home or other assisted-living facility. Other benefits may include at-home care provided by registered nurses; respiratory therapists; physical, occupational, or speech therapists; registered dietitians; or licensed social workers. Policies may pay for the cost of caregiver training for a family member or friend. They may also cover the cost of a registered nurse or other independent healthcare professional who can act as your consultant to discuss the quality of your care.

The Pros

  • Peace of mind: Depending upon the specific policy, LTCI covers an array of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities, like bathing, dressing, or getting in and out of bed.
  • Protection for your savings: 52% of people turning age 65 who will need some type of long-term care services in their lifetimes. 4
  • More healthcare choices: Regular health insurance doesn’t cover long-term care. Medicare, HMOs, and Medigap won’t pay for nursing home care, home care, or other assisted-living arrangements. Medicaid will limit your choices to nursing homes that accept payments from the government program. LTCI gives you more money to spend, which opens up options that can result in better quality of care.
  • Tax advantages: If you itemize deductions, LTCI can offer some tax advantages, especially as you get older. On your federal return (and in some states) you are allowed to count part or all of LTCI premiums as medical expenses, which are tax deductible if they meet a certain threshold. (Only premiums for “tax-qualified” long-term care insurance policies count as medical expenses).

The Cons

  • You can't wait: Do you know now if you’ll need LTCI or not? Probably not. Unfortunately, you won’t qualify for long-term care insurance if you already have a debilitating condition, so waiting to buy coverage until then is not an option.
  • Limited choices for coverage: In the late 1990s, more than 100 companies offered LTCI. By 2014, that number had dropped to just 12 insurers selling a significant number of policies to individuals.
  • High cost: LTCI is not inexpensive. And with more insurers dropping out of the LTCI market, costs are not likely to go down. Fewer choices and less competition typically mean higher costs for consumers.

How much does LTCI cost?

Rates for long-term care insurance, like any insurance, depend upon a variety of variables. When pricing your policy, the insurance company will consider:

  • Your coverage: The better the benefits, the higher the rate.
  • Your age: The older you get, the more expensive your coverage will be because you are closer to potential claims.
  • Your health: The more health problems you have when you buy the policy, the more expensive it will be.
  • Your gender: Because women generally live longer than men, they have a great chance of making long-term care insurance claims and, thus, pay a higher premium.
  • Martial status: Single people will pay more.

Get quotes from several insurance companies, as they can charge different rates for the same coverage, or offer different coverage options from one another.

Mobile Investment Account

A mobile investment account is all about convenient access to your investment portfolio. With a mobile investment account app, you can access your account information, plus a wide variety of helpful information, via your tablet or other mobile device. The “Pros” listed here are specific to features from the BOK Financial Advisors NetXInvestor Mobile investment account.

The Pros

  • Convenient anytime, anywhere access: Easy access is literally at your fingertips, 24/7.
  • Organized information: See a detailed summary of your holdings and quickly find your holdings by symbol or asset type. You can also access detailed information on your projected income along with realized and unrealized gains and losses.
  • Insightful research and powerful tools: Get current information on major U.S. market indices, advancers, and decliners.
  • Up-to-the-minute economic news and events: Read through today’s economic events and news stories. Follow a specific company and scheduled events such as earnings announcements, dividends, and splits, as well as events that affect the U.S. economy overall via the events calendar.

The Cons

  • Impatience: Such easy, instant access to information can be abused. Some may find it difficult not to constantly check and adjust investments, possibly interfering with long-term strategies.

Is a mobile investment account right for me?

Much like mobile banking, mobile investment accounts are growing in popularity. Whether one is right for you depends upon a variety of factors including your level of comfort with mobile technology, your desired level of frequent involvement with your investment account, your ability to stick to your investment strategy, and more.

Financial Planning

Financial planning is typically a suite of comprehensive services designed to help you make effective financial decisions. Services can include analysis and forecasting, professional evaluation and advice, specific recommendations, implementation support, a formal structure for making decisions, and accountability.

The Pros

  • Goals: Financial planning will help you focus on setting clearly defined financial goals, which may include funding a college education for your children, buying a home, launching a business, retiring at a specific age, or leaving a certain legacy.
  • Cash flow analysis: Learn where your money goes with an income and spending plan. This helps you determine how much can be set aside for debt repayment, savings, and investing each month.
  • Tax reduction strategy: Financial planning will include identifying ways to minimize taxes on your personal income.
  • Knowing your risks: A comprehensive risk management plan will identify your risk exposures and provide the necessary coverage to help protect you and your assets against financial loss.

The Cons

  • No guarantees: Even with professional evaluation and advice, there are no guarantees on your plan’s effectiveness in helping you reach your specific financial goals.

How do I find the right financial planner?

There is no specific template for a financial plan, and no failsafe means of choosing the perfect financial planner. Look for experienced advisors with a reputation for outstanding customer service. Seek a financial planner with a strong desire to get to know you and your goals beyond a template worksheet. Planners who are willing to invest in building a strong relationship with you are more likely to advise based on your best interests, not the interests of the firm they are working for.

Business Succession Planning

Business Succession Planning is a strategy for passing key leadership roles and/or ownership within a company to someone else after the business’ most important people move on to new opportunities, retire, or pass away. Succession plans are designed to ensure the business runs smoothly after current leaders are no longer in control of the company. Both large and small companies can benefit from a solid Business Succession Plan.

The Pros

  • Continuity: A succession plan ensures business will continue, providing for your employees and their families long after you’ve gone.
  • Legacy: In family-owned businesses, a succession plan often passes the business to the next generation.
  • Tax advantages: You can transfer portions of your business as gifts, which may allow you to transfer a significant portion of your business free from gift tax.
  • Peace of mind: Buy-sell agreement transfers allow you to prearrange the price and sale terms of your business interest between you and a willing buyer. You keep control of your interest until the occurrence of a specified event (such as your retirement). When the triggering event occurs, the buyer is obligated to buy your interest from you or your estate at full market value.
  • Lifetime income: There are options that can provide a series of payments to you, after the transfer of your business, for the rest of your life.

The Cons

  • Time: While being prepared is good, creating a thoughtful succession plan takes time and effort.
  • Being uncomfortable: Many people don’t want to think about the reasons for a change in their business, such as their declining health or death.

Aren't succession plans for large companies only?

Most businesses can benefit from a succession plan. Small, family-owned companies can train the next generation to take over the business. Mid-size to larger businesses often groom mid-level employees to assume higher-level positions. In a partnership, steps can be taken to ensure the surviving partner gets the business.

Tax Planning / Strategies

Taxes are often one of the biggest expenses in retirement. When your job is no longer providing an income, investments typically fill that gap in the form of interest, capital gains, and dividends. These returns can all be taxed differently, depending on the type of investment, your age, and a number of other factors. Tax planning is a focused effort by financial professionals to create strategies, structure income, and capitalize on charitable giving and donations in order to minimize these taxes.

The Pros

  • Increased retirement income: An effective tax strategy can minimize the dollars sent to Uncle Sam, keeping more of them at home for your retirement spending.
  • Guidance: Not all investments are taxed alike. Professional tax planners understand current tax laws and the specifics of each type of investment, helping you formulate a strategy that takes into consideration how all your investments work together.
  • Proactive planning: Experienced professionals can help structure your investments and savings today in a way that will help minimize your tax burden in retirement, even if you are many years away from retiring.
  • Options: Experienced planners can provide a variety of options that could be beneficial in your specific situation: tax-advantaged accounts, tax-efficient investments, master limited partnerships, real estate investment trusts, insurance, and annuities. They can help you understand complex options and create strategies with them that could pay off in your retirement years.

The Cons

  • Fees: Your ultimate goal in creating a tax strategy is to keep as much money for yourself as possible. Tax planning is an expense, but an effective plan should save you more than it costs.

Can't I just move?

It’s true. Moving to a place that has no state income tax, such as Florida, Nevada, or Texas is an obvious way to reduce taxes in retirement. But remember, state income taxes aren’t the only consideration when contemplating relocation. Don’t forget about the cost of living (which can vary based on a variety of factors, including insurance, heating costs, and property and sales taxes). Plus, moving is a hassle and is never inexpensive. It may be right for you. Just be sure to consider all the factors before making a move.


Alternatives are any investments in asset types beyond the traditional three: stocks, bonds, and cash. Traditionally, alternative investment assets are held by institutional investors or accredited, high-net-worth individuals. This is because of the complex natures and limited regulations of the investments. However, alternatives have become an increasingly common addition to investors’ portfolios in order to achieve broad diversification. Common alternative investments include real estate, private equity, master limited partnerships (MLPs), hedge funds, and real assets such as energy, commodities, timber, and other infrastructure.

The Pros

  • Diversification: The performance of different types of stocks and bonds has grown more similar over the years. Adding alternatives to a portfolio helps manage risk and increases diversification.
  • Tax advantages: Alternative investments are often held over a long period of time, which may result in tax benefits. For example, investments held longer than 12 months are subject to a lower capital gains tax in comparison to shorter-term investments. Each specific alternative investment may have unique tax treatment. It is important to understand the tax treatment of any potential investment prior to investing.

The Cons

  • Risk: Alternative investments are subject to the risks related to direct investment in real estate, stocks, bonds, ETFs, convertible securities, preferred stocks, MLPs, and other financial instruments. These investments are more volatile and carry more risk than other investment types.
  • Low liquidity and transparency: Most alternative assets have low liquidity compared to conventional assets, may have less investor transparency and may have fewer managers overseeing them than your typical mutual fund.
  • Not suitable for all investors: While alternatives may provide greater diversification and are more readily available today than in the past, not all alternative investments are suitable for all investors.

Don't I need to be rich to invest in alternatives?

Not anymore. In the past, an investor might need to invest at least $100,000 or even $1 million to access certain types of alternative investments. Today, however, an increasing number of mutual funds and exchange-traded funds (ETFs) offer low-cost and easy access to a wide range of alternatives — from commercial real estate to commodities to private equity.

Estate Planning

Your estate is made up of everything you own — your home, your vehicles, checking and savings accounts, investments, life insurance, furniture, personal possessions, etc. If you own it, it’s part of your estate. Estate planning is creating a plan in advance of your passing away that provides instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. Proper estate planning will also take into consideration how to accomplish your wishes with the least amount paid in taxes, legal fees, and court costs.

The Pros

  • Control: Creating a plan will let you control the distribution of your assets after you’ve died, rather than leaving those decisions to others such as family members or the courts.
  • Special care: Plans can help provide for minors or loved ones with special needs. They can also help protect those who are irresponsible with money or may need future protection from creditors or divorce.
  • Estate preservation: An effective plan will help preserve your estate for the benefit of your heirs.
  • Tax benefits: With planning, you can reduce or possibly eliminate estate taxes.
  • Privacy: Estate planning can help you avoid probate, which would make things like your will public.
  • Peace of mind: You can designate someone to act on your behalf should you become incapacitated, naming an individual or entity to manage your estate assets.
  • Retirement planning: To make an effective estate plan, you must inventory your assets. This information can also help you with your retirement planning.
  • Avoiding conflicts: Often, the absence of an estate plan can lead to disagreements and fighting among heirs. A clear plan will make your wishes known and ensure that they are carried out as you intended.

The Cons

  • It can be uncomfortable: Death is never a pleasant subject to discuss with family members, but it is necessary for planning.
  • It is an ongoing process: Estate planning is not a one-time event. Plans should be reviewed every 3-5 years and after events such as receiving an inheritance, moving out of state, changes in your wealth, major changes in your health, or changes in estate tax law.

Isn't a will enough?

Maybe not. A will is attractive because it is less expensive than comprehensive estate planning, but a will does nothing to minimize taxes or protect your assets from frivolous lawsuits or judicial or legislative confiscation. An experienced financial advisor can help you address these issues with proactive planning.

A will is beneficial for choosing a legal guardian for a minor child and provides a clear guide to how you want your assets distributed. However, it is only one of five key documents and legal arrangements you need to protect your wealth. Ask your financial planner about a durable power of attorney, advanced medical directive, trusts, and a letter of instruction as well.


A trust is a fiduciary relationship or arrangement that allows a third party (the “trustee”) to hold assets or title to property on behalf of a beneficiary. Trusts can specify exactly how and when these assets pass to the beneficiaries. Traditionally used for minimizing estate taxes as part of an estate plan, trusts offer many other benefits. There are many different types of trusts to choose from, each with its own benefits and limitations.

The Pros

  • Tax advantages: Assets in a trust may be able to avoid probate, potentially reducing estate taxes. Irrevocable trusts may not be considered part of the taxable estate, reducing the taxes due upon your death.
  • Complete control: You can be very specific about asset distribution in your trust. You not only control who gets what, you can specify when and how they get it as well.
  • Specific funding: You can set up a trust for very specific purposes, such as providing donations to a certain charity or paying for a child’s education.
  • Asset protection: Unlike a will, a trust can help protect your estate from your heirs’ creditors or from beneficiaries who may be financially irresponsible.
  • Passing probate: When a will goes into probate, it is a matter of public record. A properly executed trust, however, may allow assets to remain private by passing outside of probate. This could also save you money on court fees and taxes associated with the probate process. In addition, skipping probate may mean your beneficiaries can access your assets more quickly than they might if those assets were transferred using a will.

The Cons

  • It can be uncomfortable: Death is never a pleasant subject to discuss, but it is necessary when creating a trust.
  • It takes time and money: Creating an effective trust takes time, effort and some money to cover the fees of those planning the trust.

Can I change my mind?

It all depends upon the type of trust you’ve created. Revocable trusts are flexible and can be dissolved at any time for any reason. If you establish an irrevocable trust, however, you will lose control over the assets and you cannot change the terms or dissolve the trust. So why would anyone choose an irrevocable trust? There are a number of benefits over a revocable trust, including the reduction of the amount subject to estate taxes, relief of the tax liability on the income generated by the trust assets, and possible protection of the assets in the event of a legal judgment against you.

Premium Finance

Life insurance can be an integral part of your estate plan, helping safeguard your assets and ensure the smooth transfer of wealth to your beneficiaries. But funding the premiums can take a large cash outlay or require the sale of financial assets which can trigger higher taxes or take funds out of higher-yielding investments. Premium financing allows you to finance the majority of your premium payments using the cash surrender value of the policy to secure a loan. You may even finance the entire premium by providing additional investment assets as collateral so you have no cash outlay at all.

The Pros

  • Reduced out-of-pocket expenses: Financing your premium eliminates the large up-front payment to an insurance company.
  • Retained capital: Reduced out-of-pocket expenses also means avoiding opportunity costs. By leveraging a lender’s capital (using other people’s money), you can retain a significant amount of capital yourself.
  • Coverage without liquidation: Premium finance allows you to secure important benefits without liquidating other assets to cover the premium costs (which may trigger potential taxes).
  • Maintain your standard of living: By avoiding the high premium payments, you can use that money to instead maintain your current standard of living.
  • Keep your investment strategy intact: High premium payments could take away monies you are currently investing.
  • Simplicity: Multiple insurance policies can be attached to a single premium finance contract, allowing for a single payment plan to cover all insurance coverage.

The Cons

  • Renewal risk: Most premium financing contracts have terms less than the life of the policy, so they have to be renewed periodically, requiring refinancing.
  • Potential of increasing interest: Since the interest due is tied to an index, usually the LIBOR or Prime, if interest rates rise, the total interest charge will also rise.

How is life insurance used in estate planning?

Life insurance is often used to meet estate tax obligations. Payment from the life insurance policy can allow family assets to remain with your heirs instead of being liquidated to satisfy the cash needs of your estate.

Want to know more?

This isn’t a complete list of your investment options and these brief descriptions don’t explain everything. Ready to start a conversation?

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