FUMF Financial Planning Guide Oct 2020.Indd

Financial Planning Guide Financial Planning Process

Financial Planning Process: • Determine personal and financial goals, needs, priorities • Assess values, attitudes expectations • Determine time horizon • Determine risk tolerance • Collect records and documents • Developing the financial plan • Implementing the financial plan • Monitoring the financial plan General: • Current financial status • Capital needs • Risk tolerance • Risk management • Risk exposure Special Needs: • Divorce/remarriage • Charitable planning • Adult dependent needs • Disabled child needs • Education needs • Terminal illness planning Risk Management: • Life insurance needs and current coverage • Disability insurance needs and current coverage • Health insurance needs and current coverage • Long-term care insurance needs and current coverage • Homeowners insurance needs and current coverage • Auto insurance needs and current coverage • Other liability insurance needs and current coverage Investments: • Current investments • Current investment strategies and policies Taxation: • Tax returns • Current tax strategies • Tax compliance status • Current tax liabilities Employee Benefits: • Available employee benefits • Current participation in employee benefits Retirement: • Social Security Benefits • Current retirement plans • Current retirement plan tax exposure (distribution options) • Retirement strategies Estate Planning: • Estate planning documents • Estate planning strategies • Estate tax exposures 2 Values List/Ladder

• Peace of Mind • Security • Wealth • Good Health • Close Relationship with Family • More Time with Family • Meaningful Job/Career • Fame • Power • Free Time • A Close Relationship with God • Mission Work • Friendships • Retirement • Contributing Time or Money to Others • Personal Possessions • Traveling to Exciting Places • Respect from Others • Retirement Security • A Close Relationship with God • More Time With Family • Good Health • Friendships • Sense of Accomplishment • Leisure Time

3 Statement of Financial Net Worth

Assets Value Liabilities Balance

Cash Accounts Checking $ ______Savings $ ______Home Mortgage $ ______Money Market $ ______Cash on Hand $ ______UM Dev Fund $ ______

Personal Use Assets Home Equity Loan/ $ ______Line of Credit Residence $ ______Personal Property $ ______Auto Loans $ ______Auto(s) $ ______Boat(s) $ ______Credit Cards $ ______Vacation Home $ ______Other $ ______Student Loans $ ______

Investment Assets Brokerage Accounts $ ______Mutual Funds $ ______Investment Loans $ ______Traditional IRAs $ ______Roth IRAs $ ______Margin Account $ ______401(k), 403(b), 457 $ ______UMPIP $ ______Loans Against $ ______MPP Rollover $ ______401(k), 403(b), Other retirement plan $ ______UMPIP

Cash Value of Life Insurance Policies $ ______Loans Against $ ______Life Insurance

Deferred Compensation $ ______Salary Advances $ ______

Total Assets $ ______Total Liabilities $ ______

Total Assets Minus Total Liabilities = Net Worth $ ______

4 Retirement Income

1. Social Security a. Clergy $______b. Spouse $______

2. Clergy Pension a. Fixed Benefit i. Pre 82 $______ii. MPP $______iii. CRSP DB $______iv. Previous Employment $______b. Optional Benefit i. MPP Rollover $______ii. CRSP DC $______iii. UMPIP $______iv. Previous Employment $______

3. Spouse Pension a. ______$______b. ______$______

4. Clergy IRA a. Roth $______b. Traditional $______

5. Spouse IRA a. Roth $______b. Traditional $______

6. Annuity Contracts a. ______$______b. ______$______

7. Income from other Invested Assets $______

8. Employment Income $______

9. Total Income $______

5 Retirement Expenses

Please take a few minutes and indicate how much you spend on a monthly basis on the following items. If you are spending money on something not indicated, please make note of that item.

BUDGETED ITEM SUBTOTAL TOTAL % of Take-Home Pay

CHARITABLE GIFTS Church $ ______Charity 1 $ ______Charity 2 $ ______$ ______% ______

SAVINGS Emergency Fund $ ______Retirement Fund $ ______College Fund $ ______$ ______% ______

HOUSING Rent $ ______First Mortgage $ ______Second Mortgage $ ______Real Estate Taxes $ ______Homeowner’s Ins. $ ______Repairs or Maint. Fee $ ______Homeowner’s Assoc. Dues $ ______Replace Furniture $ ______Other $ ______Other $ ______Other $ ______$ ______% ______

UTILITIES Electricity $ ______Water $ ______Gas $ ______Phone $ ______Cell Phone $ ______Trash $ ______Cable/Internet $ ______$ ______% ______

FOOD Grocery $ ______Dining Out $ ______$ ______% ______

6 DEBT Visa 1 $ ______Visa 2 $ ______Mastercard 1 $ ______Mastercard 2 $ ______American Express 1 $ ______American Express 2 $ ______Discover 1 $ ______Discover 2 $ ______Dept. Store Card 1 $ ______Dept. Store Card 2 $ ______Finance Co. 1 $ ______Finance Co. 2 $ ______Home Equity Line of Credit $ ______Credit Line $ ______Student Loan 1 $ ______Student Loan 2 $ ______Medical 1 $ ______Medical 2 $ ______IRS Debt $ ______Personal Loan $ ______Other $ ______Other $ ______$ ______% ______

TAXES Federal Income Tax $ ______Social Security Tax $ ______Medicare Tax $ ______$ ______% ______

7 Personal Debt

Please include such debt as credit card, student loan, auto loan, mortgage loan, home equity lines of credit, etc.

Account #1

Credit issuer ______Account Type (credit card, etc.) ______Original amount: $______Current balance $______Credit line $______Current interest rate ______% Is this a teaser rate? ______Rate: Variable or Fixed ______Targeted monthly payment $______Minimum monthly payment $______Term of loan ______Date you opened account ______/______/______

Account #2

Account #3

8 Account #4

Account #5

Account #6

9 Account #7

Account #8

Account #9

10 Account #10

Account #11

Account #12

11 Cash Management Program

GENERAL CASH FLOW SPECIAL CASH INFLOW P A Represents all of the regular, Represents unscheduled or Y expected sources of income whether Tithe 10% irregular income, income not already from salaries, rents, annuities, or part of the family budget profit from your own business.  whether from gifts, overtime, Y inheritance or the like. O U R S 80% INVESTMENT RESERVOIR E An account designed to accumulate L  funds for long term investing. F  Keeping it separate helps prevent READY CASH it from wasting away in the dailyness 10% Represents the amount you need of life. It is usually a to cover monthly living expenses. money market account. Usually it is kept in a checking account. LIMIT Time: A predetermined decision based on your willingness to examine your investment decision. LIMIT Average Monthly Expenses Amount: Usually set by the nature of your investment and the economics of scale.

EXCESS

EXCESS Is Your Emergency Fund Maintained at a Desired Level? YES

DIVERSIFIED INVESTMENTS Purpose: To obtain or meet long term goals. NO Limit: Dollars – what it will take to meet your goals. Risk – appropriateness in terms of the context of your goals (e.g. timing, security, ethics, Emergency Fund and stewardship).

12 How Much Life Insurance Do I Need?

A. Human Life Value Approach: (Based on lost income and not the needs of surviving dependents)

John is 55 and expects to work to age 67. His remaining work life expectancy is 12 years. His salary is $60,000. He expects inflation to be 3%. He expects wage increases to be 3%. The present value of John’s life before consumption and taxes is $60,000 × 12 years = $720,000. Assume that John pays 15% in income taxes and 15.3% in self-employment taxes (14.13% adjusted for AGI). John personally consumes 20% of his after-tax net earnings.

Gross Pay $100.00 Income Tax [$15.00] SECA Tax [$14.13] After Net Tax $70.87 Consumption [$14.17] (20% of 70.87) Net to Survivors $56.70

John needs to insure income to .5670 x $720,000 = $408,240

B. Needs Approach

• All recurring expenses to dependent survivors • Marital status, role of spouses, size of family, dependents ability to work • Lifestyle impact the needs approach a. Fund for final expenses b. Fund for readjustment non-recurring costs- 2 years c. Dependency period income d. Mortgage payment fund e. Educational fund f. Life Income for surviving spouse

• Needs are listed on a monthly basis • Calculation of amount: a. Annuity approach b. Capital preservation model

13 Determine Your Tax Bracket to Track Your Tax Savings

Your effective tax bracket is the percentage of your total income you pay in taxes. If your total income is $60,000 and you pay a total of $7,500 in federal taxes, your effective tax bracket is 12.5% (7,500 divided by $60,000 = 12.5%). In tax planning, knowing your effective tax bracket will motivate you to create a good tax plan.

Your marginal tax bracket is the percentage in taxes you pay on your top dollar of taxable income. It is also the percentage in tax you will pay on one additional dollar of income, or conversely, the percentage you will save in taxes for each additional dollar of tax deductions you create.

The schedule below will show you your marginal bracket and the amount of tax you will pay based on your taxable income. Your marginal bracket is shown as a percentage in the left-hand column.

Married Filing Jointly Single Bracket 10% Up to $19,750 Up to $9,875 12% $19,751 to $80,250 $9,976 to $40,125 22% $80,251 to $171,050 $40,126 to $85,525 24% $171,051 to $326,600 $85,526 to $163,300 32% $326,601 to $414,700 $163,301 to $207,350 35% $414,701 to $622,050 $207,351 to $518,400 37% Over $622,051 Over $518,401

Standard Deduction $24,000 $12,000

Personal Exemption Eliminated Eliminated

• Tax brackets for heads of households and married people filing separately are somewhat different. • Tax credits are a dollar-for-dollar reduction in your income tax bill. • Tax deductions reduce the amount of income that is taxable.

14 Hiring a Financial Advisor (from FPA website)

Why FPA Members

FPA is the largest membership organization for personal financial planning experts in the U.S. and includes professionals from all backgrounds and business models. FPA members adhere to the highest standards of professional competence, ethical conduct and clear, complete disclosure to those they serve. A financial professional from FPA can help you: • Set realistic financial and personal goals • Assess your current financial health by examining your assets, liabilities, income, insurance, taxes, investments, and estate plan • Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths • Put your plan into action and monitor your progress • Stay on track to meet changing goals, personal circumstances, stages of your life, products, markets and tax laws

FPA PlannerSearch® is a large database of financial planning experts who meet the following criteria: • Are a current member of FPA in good standing • Are a CERTIFIED FINANCIAL PLANNER™ professional • Are a RIA or bank affiliate* • Adhere to FPA’s Code of Ethics • Abide by the FPA Standard of Care

*In accordance with FPA policy, participants in FPA PlannerSearch must be affiliated wtih a state or SEC-registered investment adviser or a state or federally chartered trust or banking institution, unless they are otherwise exempt from registration.

Credentials

FPA supports the CFP® certification as the standard for financial planning:

CERTIFIED FINANCIAL PLANNER™ (CFP®) Those with the CFP® designation have demonstrated competency in all areas of finance related to financial planning. Candidates complete studies on over 100 topics, including stocks, bonds, taxes, insurance, retirement planning and estate planning. The program is administered by the Certified Financial Planner Board of Standards Inc. In addition to passing the CFP certification exam, candidates must also complete qualifying work experience and agree to adhere to the CFP Board’s code of ethics and professional responsibility and financial planning standards.

Other Financial Services Credentials

Chartered Financial Analyst (CFA) The CFA charter is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks, bonds and their derivative assets. The program focuses on portfolio management and financial analysis, and provides a generalist knowledge of other areas of finance. Additionally, the CFA charter has experienced increasing relevance and demand within corporate finance.

15 Chartered Financial Consultant (ChFC) The Chartered Financial Consultant® (ChFC®) program, offered by the American College, focuses its curriculum on the financial planning needs of individuals, professionals and small business owners and covers key financial planning areas, including insurance, income taxation, retirement planning, investments and estate planning.

Certified Public Accountant/ Personal Financial Specialist (CPA/PFS) The CPA designation is awarded by the American Institute of Certified Public Accountants (AICPA) to accountants who pass the AICPA’s Uniform CPA Examination and satisfy the work experience and statutory and licensing requirements of the state(s) in which they practice. The Personal Financial Specialist (PFS) program allows CPAs to demonstrate their knowledge and expertise in personal financial planning. Also, PFS credential holders have additional experience, education and examination requirements.

Chartered Life Underwriter (CLU) The CLU designation is awarded by The American College to insurance and financial services professionals who have met the College’s three-year business experience requirement, passed its eight college-level education courses and agreed to abide by its code of ethics.

How Planners Charge Financial planners can be paid in a variety of ways, and each has its merits. Choosing the appropriate method depends on your individual situation. FPA advocates for the highest standards for competent and ethical planners, regardless of compensation or business model. However, before entering into a relationship with a planner, you should have a clear understanding of how he or she will be compensated.

Fee-only All of the financial planner’s compensation from his or her client work comes exclusively from the clients in the form of fixed, flat, hourly, percentage or performance-based fees.

Commission-only There is no charge for the planner’s advice or preparation of a financial plan. Compensation is received solely from the sale of financial products you agree to purchase in order to implement financial planning recommendations.

Combination Fee/Commission A fee is charged for consultation, advice and financial plan preparation on an hourly, project or percentage basis. In addition, the planner may receive commissions from the sale of recommended products used to implement your plan.

Salary Some planners work on a salary and bonus basis for financial services firms.

Please Note: In all of the above categories of compensation, you should request information on any real or potential conflicts of interest. In addition to commissions received from any financial product sales, you should ask whether there are outside incentives or bonuses to be gained by the planner for certain recommendations.

What to Bring to a Meeting with a Planner There are a number of documents you’ll need once you engage a financial planner; a comprehensive list may be customized by your planner for your specific needs. Be prepared to answer questions regarding your age, current income, hobbies, goals, philosophy on money, groups you belong to, etc.

16 Recommended Documents • Bank Statements • Pay Stubs • Check Registers • Credit Card Balances • Mortgage or Loan Payment Books • List of Assets • List of Liabilities • Completed Expense Worksheet • Trusts, Healthcare Powers of Attorney, Health Care Proxy or Other Powers of Attorney • Titles for Homes, Cars, Real Estate, etc. • Retirement Account Statements • Social Security Statements • Pension Benefit Statement and Booklet • Investment Statements • Listing of Available Investment Options in Investment and Retirement Accounts • Stock Options • Homeowner and Automobile Declaration Pages • Life, Disability or Long-term Care Insurance Polices • Business Liability, Director and Officer Insurance Policies • Tax Return • Tax Estimate for Next Return (e.g., Deductions, Credits, etc.) • List of Employee Benefits

Starting Your Search Ask for names from friends or business associates who may have used a financial planner. Attorneys, accountants, insurance agents, bankers and other financial specialists also can be good sources because planners often work with them to carry out a client’s plan.

Basic Information to Gather • Financial planning and other financial designations a planner holds • Educational background and work experience • Licenses to sell certain financial products, such as life insurance or securities • Services the planner provides • The planner’s basic approach to financial planning • Areas of specialization • Types of clients the planner serves, and any minimum net worth or income requirements • Professional affiliations, including membership in the Financial Planning Association • How the planner prepares a plan • How the planner might address your particular needs • Whether the planner or others will implement recommendations from the plan • Business relationships the planner has that might present a conflict of interest • How the planner is paid for services and typical charges

Disclosure Document Request a written disclosure document from the planner. This will either be what’s called a Form ADV or an equivalent brochure. This should answer many of your questions. You may then want to follow up with a personal interview, which many planners will do for free. 17 Face-to-Face Interview A face-to-face interview should give you a personal sense about the planner. Does the person seem forthright in their answers? Do you have a sense of trust and rapport? Is the person focused on your needs, not selling products?

Oversight Agencies Check with the SEC, appropriate state agencies, your local Better Business Bureau and CFP Board at 888.CFP.MARK (237.6275) to determine if complaints have been filed against the planner you are considering.

Questions to Ask It’s important to make sure the planner you choose is a good match for you, so ask lots of questions. We’ve collected a number for you to incorporate into your initial conversation with a planner, broken out under the below topics.

• Designations & Licenses • Education • Experience • Fees & Compensation • General • Services & Work Philosophy

Designations & Licenses • Insurance • Securities • CPA • J.D. • Other

Are you personally licensed or registered as an investment adviser with the: • State(s)? • Federal Government?

If yes, how are you going to tell me when you are acting as a sales agent of the brokerage firm and when you are acting as an investment adviser?

If no, why not?

Is your firm licensed or registered as an investment adviser with the: • State(s)? • Federal Government?

If no, why not?

18 Will you provide me with your disclosure document Form ADV Part II or its state equivalent? • Yes • No

If no, why not?

Will you provide me with a written disclosure detailing any disciplinary history for you or your firm?

If no, why not?

Education What are your educational qualifications? Area of study:

• Certificate • Undergraduate Degree • Advanced Degree • Other

What financial planning designation(s) or certification(s) do you hold? What financial planning continuing education requirements do you fulfill?

______hours every ______year

Experience Do you have experience in providing advice on the following topics? If yes, indicate the number of years.

• Retirement Planning • Investment Planning • Tax Planning • Estate Planning • Insurance Planning • Comprehensive Planning • Education Planning • Business Planning • Other

What are your areas of specialization? What qualifies you in this field?

How long have you been offering financial planning advice to clients?

• Less Than One Year • One to Four Years • Five to 10 Years • More Than 10 Years

19 How many clients do you currently have? • Less Than 10 Clients • 10 to 39 Clients • 40 to 79 Clients • 80+ Clients

Briefly describe your work history.

Fees & Compensation How are you paid for your services? • Fee • Commission • Fee & Commission • Salary • Other

What do you typically charge? • Fee:

Hourly rate $ ______Flat fee (range) $ ______to $ ______Percentage of assets under management: ______percent

• Commission:

What is the approximate percentage of the investment or premium you receive on: stocks and bonds ______mutual funds ______annuities ______insurance products ______other ______

Do you have a business affiliation with any company whose products or services you are recommending? • Yes • No

Explain:

Is any of your compensation based on selling products? • Yes • No

Explain:

Do professionals and sales agents to whom you may refer me send business, fees or any other benefits to you? • Yes • No

Explain:

20 General How might you address my particular needs? How often will my plan be updated?

Are you affiliated with any professional associations?

Is the account that you are offering an “advisory account,” or is it a “brokerage account” exempt from investment adviser registration?

If it’s a brokerage account, are you required under law to act as a fiduciary by always placing my interests first?

Regarding any brokerage account that I may open, what are the potential conflicts of interest that you have when recommending certain products for sale to me, and how will you disclose these to me prior to purchase, including any special cash payments or incentives that you receive?

Are you an owner of, or connected with, any other company whose services or products I will use? • Yes • No

Explain:

Do you provide a written client engagement agreement? • Yes • No

Explain:

If no, why not?

Services & Work Philosophy What services do you offer?

Describe your approach to financial planning. Who will work with me? • Planner • Associate(s)

Will the same individual(s) review my financial situation? • Yes • No

If no, who will?

What type of clients do you serve?

Do you have a minimum net worth or income requirement? What kind of services can I expect?

21 August 18, 2016

Name Address Address

Dear

Thank you for the opportunity to meet with you and ______. I welcome the opportunity to work with you as your financial planner. This engagement letter outlines the specific terms of our financial planning engagement. If the scope or terms of the financial planning engagement change, they should be documented in writing and mutually agreed upon by all parties to the engagement.

Please be assured that all information that you provide will be kept strictly confidential. During the financial planning engagement, I may, on occasion, be required to consult with other third-party professionals at which time I will obtain your written permission to disclose your personal information.

As discussed during our introductory meeting, this engagement will include all services required to develop a retirement plan. These services will specifically include:

• Reviewing and prioritizing your goals and objectives. • Developing a summary of your current financial situation, including a net worth statement, cash flow summary, and insurance analysis. • Reviewing your current investment portfolio • Developing a financial management strategy, including financial projections and analysis. • Completing a retirement planning assessment, including financial projections of assets required at estimated retirement date. • Assessing estate net worth and liquidity. • Identifying tax planning strategies to optimize financial position. • Presenting a written financial plan that will be reviewed in detail with you. It will contain recommendations designed to meet your stated goals and objectives, supported by relevant financial summaries. • Developing an action plan to implement the agreed upon recommendations. • Referral to other professionals, as required, to assist with implementation of the action plan.

This is not intended to be an ongoing relationship. The engagement will end upon delivery of the services described above. Either party may terminate this agreement by notifying the other in writing or by email.

My services are pro-bono and are a part of the ministry of the Florida United Methodist Foundation.

Please be advised that I do not receive a referral fee from any other professionals to whom I may refer you.

In order to ensure that the financial plan contains sound and appropriate recommendations, it is your responsibility to provide complete and accurate information regarding pertinent aspects of your personal and financial situation including objectives, needs and values, investment statements, tax returns, copies of wills, powers of attorney, insurance policies, employment benefits, retirement benefits, and relevant legal agreements. This list is not all-inclusive and any other relevant information should be disclosed in a timely manner. It is your responsibility to ensure that any material changes to the above noted circumstances are disclosed to me as your financial planner on a timely basis since they could impact the financial planning recommendations.

I have no known conflicts of interest in the acceptance of this engagement. I commit that I will advise you of any conflicts of interest, in writing, if they should arise.

I acknowledge my responsibility to adhere to CFP Board’s Standards of Professional Conduct, and all applicable federal and state rules and regulations. At all times during this engagement, I shall place your interests ahead of my own when providing professional services. In addition, since this engagement includes financial planning services, I am required to act as a fiduciary, as defined by CFP Board. You can learn more about CFP Board’s ethical requirements at www.CFP.net.

I look forward to working with you and helping you reach your financial/retirement goals.

Sincerely,

Rev. John D. Peterson, CFP®, CASL®

Clergy Spouse I accept the terms of this engagement letter. I accept the terms of this engagement letter.

______22

More information:

REV. JOHN PETERSON CFP®, ChFC®, CASL® Vice President, Stewardship and Education Regional Stewardship Consultant [email protected] 866-363-9673, x 7103

October 2020