As a general disclaimer, the tax code is complex, everyone’s situation is a little different, therefore, please do not take any action on strategies discussed without first consulting with an expert about your individual situation. The information contained in this article is believed to be reliable and accurate but, is not guaranteed and is subject to change under Federal Tax Law.
Seven Common Financial Blind Spots

1 – POD – Payable On Death – This is a common form that can be found at, and should be held with, any accounts at banking institutions. This is especially true if there is a non-spouse who will need immediate access to account funds in the event of your passing. Savings, Checking, CD’s, & Money Market accounts all can fall into this category. This is a form that will help to bypass probate on any accounts that your loved ones might need access to in the event of your death, to maintain adequate cash flow for living expenses & bills or even pay for your final expenses. Each account that you hold should have a POD form attached to it. It is a simple one-page form that should be requested if not provided.

2 – TOD – Similar to POD, TOD means Transferable On Death and is for your beneficiaries to gain access to needed funds from any type of brokerage account that you may hold. A TOD form should be included with any brokerage account to which you would like your loved ones to have access to upon your passing. Otherwise, both Bank accounts and Brokerage accounts run the risk of being held up in lengthy probate. Have you heard of POD or TOD? Most have not. The reason that you probably are unaware of these forms is that is the banker or broker you deal with either does not know that these are forms they should provide or, does not want to provide them to you. What happens in probate? Your money is tied up while disputes and claims are settled. Who keeps the money while those disputes are settled? The bank or brokerage house with which the account is held holds that money until probate is disputed and settled. Why would they want to keep control of money while it is in dispute? Because they continue to earn interest and returns off of the money while it is in dispute and until probate is resolved. This is money that could be needed and put to use or, put to work for your loved ones. Make sure that you have these important forms attached to your accounts.

3 – UMBRELLA – The lack of an Umbrella Insurance Policy is a common financial blind spot, both for individuals and business owners. An umbrella policy is an additional insurance policy that can cover and protect you in the event of a lawsuit in excess of other liability coverage. Suppose that you are in an auto accident or, have a delivery man walking up the steps to your business, what would happen if they tripped, slipped, fell, and broke an ankle or leg, putting them out of work for an extended period. Most likely, they would attempt to be compensated for their injury and lost wages. A lawsuit would likely follow. He or she may not find the current coverage amount in your homeowners or automobile accident insurance ample to replace these wages and compensate him or her for the pain and suffering which you have caused them. When people sue, they tend to sue in the high dollar figures, millions instead of thousands. In order to protect yourself from losing your income, wages, savings, or even worse, your very business, and severely affecting your standard of living, with the potential result of bankruptcy, make sure that you have a reasonable umbrella policy in place. However, if you do have an umbrella policy, make sure that you do not make this common knowledge. If everyone knows that you have this amount of insurance coverage, you are more likely to become the target of frivolous litigation. Typically a large sum of umbrella coverage can be purchased for a relatively low cost.

4 - BUY/SELL PARTNERSHIP AGREEMENTS– In business, the importance of having buy/sell partnership protection cannot be understated. If you share in the ownership of a business with one or more partners, and they were to pass away, how would you like to suddenly be dealing with the spouse or family of your business partner in the decision making process of your business? If no buy/sell protection is established, this is how that transaction would progress. Does your partners’ spouse know about your business, how to run it, do they know how it operates, do they know how to budget or run the books, do they know the client’s needs and wants? Could they even recognize a client? Would they make the same decisions about the business that your partner would have made? If you do not have a buy/sell agreement in place, prepare to deal with this eventuality. Be sure to have a buy/sell partnership agreement in place so, that if something was to happen, life insurance would kick in in an amount that would allow the remaining partner(s) to buy the surviving spouse’s portion of the business back at a fair price and that these wishes are properly discussed, agreed upon, and documented by all business owners. This will allow you to “buyout” your partner’s beneficiaries from the business.

5 – BENEFICIARIES – Another far too common financial mistake is insurance beneficiary blunders. Please know that once a person passes away, the beneficiaries on their insurance policies are all but set in stone. Too many times insurance beneficiaries are not updated or changed with events that happen in life. People buy insurance, make a will, and lock it away in some fire proof safe or safety deposit box and forget about it until someone asks if you have one and you think, “Yes, I have that all taken care of.” You need to be sure to review and update these documents on a regular basis. One recent story that comes to mind, I was sitting in my office and received a phone call from a lawyer who was sitting in her office with a widow. She had just unexpectedly lost her husband of twelve years (and the father of her youngest child). Both the widow and her husband had been married once before. He had assured her that he did have insurance and that if anything were ever to happen to him, that she would be taken care of. However, the insurance policy that he did have in place was an old one (and was not a small one either) but, since he had purchased the life insurance before his divorce from his first wife, or the birth of his youngest kid, and never had taken the time to update his policy, the policy still read that the first wife was the insurance beneficiary and all of the settlement went to her. While alive this is a simple document to change and update but again, once the owner of a policy is deceased, it is almost impossible to alter. Upon big events in your lifetime, or simply on a regular basis, maybe around tax time, pull those documents out and double check that nothing has changed that would require you to submit a change in your beneficiary allocations, and if something has changed, don’t delay making those necessary changes in your documents.

6 - RETIREMENT PLANNING – I also see many mistakes that run in conjunction with retirement planning. Not saving enough, not saving soon enough, not placing retirement savings in the proper vehicles, not reallocating as your life and needs change. “Everybody has some money that they don’t want to lose!” Make sure that you are taking into account that current retirement savings is actually future retirement income. Most times this is money that you will rely on to maintain your standard of living. Make sure you consider what needs to happen, what your goals are, and how these may change as you continue to save towards retirement. Risk and growth in the early stages of retirement saving should be toned down as we near retirement age, because it becomes harder to make up for losses. Losing 30-40% of your retirement savings the year or two before you plan on retiring can be devastating and can severely alter plans. The market is unpredictable. It is fine to have a gambling account, so long as you know and recognize that that is what it is. Because of great market returns in the late eighties and through the nineties many savers began to co-mingle their retirement savings with their gambling investment accounts in hopes of big returns and a better retirement nest egg. Unfortunately, we have seen three major market downturns since 1998, which had helped many of these same people see all too vividly the error in this logic. This can also happen after you are well into retirement. I have dealt with too many people these last few years, who retired comfortable (MILLIONAIRES!) but, were told that they should keep their retirement accounts in the market, at risk, because it produced larger returns than safe, guaranteed savings vehicles. Now they have half the money and income they had when they entered retirement and are either severely altering their lifestyle or, are going back into the work force. “It is harder to gain money than it is to lose it.” A simple math problem… When does -50 plus 100 equal 0? When you are talking about the percentage of you money. If you lose 50% of your money, it takes a 100% gain to get back to break even. That is a 100% gain, just to make it back to your original starting point. When is the last 100% market or investment gain that you remember having? How about the last 40-50% drop? Use rules of investing like the rule of 100 to give you a starting point for proper allocation and diversification. Make sure to structure savings and investments so that you can never run out of income once you do retire and so that you are protected and safeguarded against inflation, market fluctuation, and events that are eventualities in life such as the death or loss of a spouse.

7 - EXIT STRATEGY – The seventh largest financial blind spot is the lack of a solid exit strategy. We hear about exit strategy a lot these days with different military involvements but, having a financial exit strategy is just as crucial when talking about winning your personal financial battles. Many people put money into something because it is “a good buy” but, you don’t make money buying things, you make your profit selling them. It is good to get things for a low price but, only if you can sell them at a higher price. You should know what your exit strategy is from any purchase, savings, or investment that you make. You should always know what you are getting into but, more importantly you should know why you are getting into it and how, when, and what you can expect to get out of it. Getting into any investment can be a mistake if you have not clearly defined your exit strategy. This can be said for your working career as well. Not everybody would feel comfortable retiring at 55, not everybody wants to work to 65. Begin planning early for an exit strategy, so that you fully understand what to expect from your retirement planning.

If you can manage to avoid these seven common blind spots and pitfalls, you will free yourself from unnecessary worry, and put yourself on the right path towards your financial independence.

For more information or to contact Peter Richon with questions or comments you may call 919-657-4201 or email prichon@capitalfinancialusa.com

Author's Bio: 

Peter Richon is a graduate of the University of North Carolina at Chapel Hill. He currently resides in Raleigh, North Carolina and is a Strategic Wealth Coach with Capital Financial Advisors. He works with individuals and business owners to maximize financial and retirement planning success and minimize downside risk. His radio program "The Financial Safari" airs 35 times per week on over 20 stations nationwide.