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Imagine going to the doctor for headaches that have been increasing in pain and frequency for the past 2 years.  What would you expect in terms of your treatment and how the doctor is paid?

PAYMENT – The first doctors were travelling medicine men who sold magical elixirs out of the back of a wagon.  The first dentists were barbers.  The first financial planners were life insurance agents and stock brokers.  Like doctors, dentists and lawyers, we believe professional financial planners should be paid for their expertise and their services, not for the financial products they sell.  They should be paid by so they are loyal to you, and not to the insurance or investment company by whom they are employed.

PROCESS – You would expect the doctor to ask questions and perhaps conduct tests to determine the cause of your headaches.  After the diagnosis, you would expect a plan of treatment.  You would expect the recommendations to depend on the diagnosis and range from stress management to chemotherapy.  In the 21^st century, you should expect the same kind of professional standards for treating your financial issues.  The Certified Financial Planner® Board of Standards has defined a six-step process for giving financial and investment advice.

The 6-step process for creating your financial plan is similar to the process for creating a medical plan of treatment for your headache.  Dispensing investment or financial advice without a process and plan is like writing a prescription without a diagnosis and plan of treatment.

Here is the Six Step Process as defined by the CFP® Board of Standards:

Everyone has a plan to retire at some point. For some that time horizon may be shorter than it is for others. No matter when you plan to retire, it is important to keep an eye on your assets to make sure they are in alignment. There are several events that pop up in life that many individuals fail to think about that has a great impact on their financial future in thier portfolio.

 Here are the typical events which trigger portfolio re-balancing of a passively managed portfolio:

1. Implementation of asset allocation recommendations from the financial plan
2. Re-balancing at annual review
3. Re-balancing required by cash infusion from such events such as:
   • Annual IRA or Roth IRA contribution
   • Rollover from a 401k, pension, IRA, etc.
   • Conversion to a Roth IRA
   • Transfer/consolidation from other accounts (savings, brokerage, etc.)
   • Gift or inheritance
   • Liquidation of cash value life insurance
   • Equity pulled out of home from a refinance
   • Sale of home
   • Etc.
4. Re-balancing required by cash withdrawal from such events such as:
   • Emergency
   • Major purchase (auto, new home, etc.)
   • Retirement
   • Unemployment
   • Child begins college
   • Wedding

Not rolling over your 401(K) when you leave a job is a big mistake. If you need to place your money in a more lucrative investment, you will not be able to do so if you leave your money in your old employers 401(K). This is money you have placed into this fund over the years and it belongs to you. You need to ask yourself important financial questions when it comes to your investments.

Once you invest money into the 401(K), the employer dictates what kinds of investments your money is put into. Moving your money upon leaving gives you the opportunity to decide what types of investments you want to place your money into. When money is invested with a company, it is important for a company to invest your money to make sure the company benefits; your benefiting may be secondary.

The economy has taken a treacherous turn and it is not guaranteed your money is placed in the best places for growth. If you roll your money over you have a chance to place your money in a situation where you have more control. Leaving an employer you may have needed to draw money off of your 401(K) or you may have money coming into this account and you want all of this money accounted for before you make a 401 (K) rollover. You do not want to incur any taxes or penalties which can prove to be very expensive.

A rollover is by far the easiest way to place yourself in a position to get into an investment situation you might normally not have the money for. You will not have to pay any outside expenditures, all you will need to do is fill out the proper paperwork and have your money transferred.

Once you take the steps to fill out the paperwork and the money has been mailed to you be sure you go ahead and get your account funded. You do not want the government deciding you are keeping the money and taking penalty action which can take quite a bite out of your wallet. If you fund your account within 60 days this money can be reclaimed but it is a tedious process and you will have lost the earnings on the funds.

It is wise to do a direct rollover and to place your 401(K) in a separate IRA this way your 401 (K) will not become tainted by taxed money. The money will still be in a tax deferred account and you can decide what fund you want to invest in without losing a large portion of your investment to penalties.

In these economic times it is extremely important to keep a close watch on your finances. With the rate of layoffs and people being terminated from their place of employment it is important to understand the options you have for taking care of your 401(K). It is indeed your money, but you will need to follow up to make sure your money is place where you want it to be. The procedure can be held up by a glitch in the paperwork, staying informed of the final outcome is very important to your financial health.