Yearend Assessment for PFP Clients
YEAREND ASSESSMENT FOR PFP CLIENTS Gregory J. Lane, CPA, CFP, tax manager in the Scottsdale, Arizona, office of Virchow, Krause & Company, provides questions CPAs can ask PFP clients at yearend to help them organize their finances. The end of the year is a good time for practitioners to help clients review their financial goals and determine whether they have taken the right steps to meet them. Here are some of the most important questions CPAs can ask: 1. Do you know how much discretionary income you will have this coming year and over the next several years? Clients should set up a personal budget for 1990 so they know how much extra money is available for entertainment, vacations, gifts, etc. Without this budget, they may be spending and charging more than they can afford. A personal budget for clients and their families is a very important first step. 2. Have you reviewed your homeowner and auto insurance policies within the last two years? Homeowner insurance must adequately cover the full replacement value of the home and its contents; clients also should have the separate coverage required for jewelry, computers or a business in the home. Auto insurance liability limits must be high enough to cover potential losses and accidents involving uninsured and underinsured drivers. Clients who don't perform this review may have inadequate coverage and may be paying too much in premiums. 3. Have you estimated your income needs at retirement? Clients should consider how many more years of earning power both spouses have. They can determine how much they will need to save now to live comfortably at retirement based on their estimated costs. They may be shocked to discover that Social Security alone will not assure them the same standard of living in their retirement years. It's important they start planning now. The younger clients are when they start saving, the less they will have to put away each year. 4. Do you have an investment strategy based on your income needs, age, goals and risk tolerance level? Clients should have a systematic and goal-oriented approach to their investment strategies. They should realize that different investments are suitable for different age groups and levels of risk tolerance. In other words, if they focus on safety of principal at all times, they may be losing out on generating a higher current rate of return and possible future appreciation. If they have no investment strategy, they may actually end up with less, not more, than they started with. Clients should set goals and follow through on them. 5. Have you reviewed your life insurance needs within the past three years to see if you and your family are adequately covered and if your premiums are reasonable? The right amount of life insurance is important to overall financial health. …