While the concept of a “trusted contact person” has been around since 2018, regulators are currently encouraging brokerage firms to ask you to name yours. The goal? To provide you with “additional protection.” This is what you need to know.

“Trusted contact” is a term used in FINRA’s customer account information rule (rule 4512(a)(1)(F), which you can view here: tinyurl.com/uy66acjk). FINRA, the Financial Industry Regulatory Authority, regulates the brokerage industry.

Under the rule, when you open an account (or update it), the brokerage firms must ask you for the name of a trusted contact. You have the option of saying yes or no.

The goal is to give authority to the firm to talk with someone about your account in case of a problem -- perhaps the brokerage firm lost contact with you due to a natural disaster, or there is concern about potential fraud.

Because brokerage firm policies can differ, read your firm’s brokerage agreement to see when it will share information with the trusted contact.

In this example, you authorize the firm to reach out to your trusted contact:

“If there are questions or concerns about [your] whereabouts or health status;”

“If [the firm] suspects that [you] may be a victim of fraud or financial exploitation;”

“If [the firm] suspects that [you] might no longer be able to handle [your] financial affairs;”

“To confirm the identity of any legal guardian, executor, trustee, authorized trader, or holder of a power of attorney;”

“If [the firm] has any other concerns or is unable to contact [you] about [your] account(s) held at [the firm].” (Also see this Securities and Exchange Commission’s Investor Bulletin at tinyurl.com/8yb4f42r.)

You would be giving authority to the firm to judge when these circumstances arise.

What information might the brokerage firm share with your trusted contact?

Again, read your brokerage agreement.

In this example, the firm can share “nonpublic personal information.” That includes “financial account information and balances, recommendation for purchase of a security or insurance product, and ... personally identifiable financial information (i) provided by a consumer to a financial institution; (ii) resulting from any transaction with the consumer or any service performed for the consumer; or (iii) otherwise obtained by the financial institution.”

Why would the firm do this? “To address possible financial exploitation; to confirm the specifics of [your] current contact information or health status or the identity of any legal guardian, executor, trustee, or holder of a power of attorney; or as otherwise permitted by FINRA rules.”

Well enough. What happens next? Are there limits on the authority of a trusted contact?

Indeed, there are. The person “cannot make trades in the investor’s account; cannot make decisions about the investor’s account; and does not become a power of attorney, legal guardian, trustee or executor by virtue of being identified as a trusted contact,” according to a joint release (tinyurl.com/pkhse8k8) issued by FINRA and the North American Securities Administrators Association (NASAA).

One more thing: When you provide a trusted contact, you may also be agreeing to indemnify the firm if something goes wrong. Here is an example: You indemnify the firm “from and against any and all claims, judgments, taxes, fines, penalties, damages, liabilities, costs, and expenses” related to “any claim, judgment, or proceeding arising out of or relating to [the firm] contacting, or failing to contact,” the trusted contact.

What can go wrong? I can only guess. What can go right? Potentially preventing fraud.

The concept of protecting a customer is laudable. How well this works will depend on the circumstances, including the brokerage firm’s protocols after engaging with the trusted contact. If you have any experiences you want to share with my readers, write to me at readers@juliejason.com.

For more information on the subject go to finra.org/trustedcontact, which includes an explanatory video.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Sometimes it’s nice to do something on the spur of the moment and leave structure and planning behind. Spontaneity is a good trait to have in your life -- but not when it comes to funding your retirement years.

That’s one of the conclusions reached by the Franklin Templeton RISE (Retirement Income Strategies and Expectations) Survey (tinyurl.com/thwxju9s) of 2,004 adults. The survey, in its 10th year, “explores attitudes and concerns about preparing for and living in retirement.” Franklin Templeton is a global investment firm.

One section of the survey dealt with those who were retired and their plans for how they would spend their nest eggs. A third of those questioned said, “I’m spending what I need each year and hoping it will last.” That’s definitely living in the moment.

Another 41% said they were trying to limit their spending “to sources of income and not to dip into ... savings.” A much better approach.

Pre-retirees (ages 55 to 64) expressed concern about their futures, with 58% saying they were behind on their saving for retirement. Sixty-three percent did not have a strategy for generating income for 30 years -- the possible length of their retirement.

When retirees were asked about what they would have done differently, 48% admitted they should have saved more.

Sooner or later, hopefully, you will be able to retire secure in the knowledge that you have saved enough to maintain your lifestyle for the rest of your life -- and perhaps to leave a legacy for children and/or charity.

As regular readers can guess, I’m a fan of knowing your numbers. Specifically, your household cash flow -- dollars earned vs. dollars spent. The difference between the two numbers (inflow vs. outflow) defines the retirement income gap.

More specifically, how much money is inflow from “guaranteed” sources (Social Security and pensions) versus what money you have going out. Naturally, the ideal situation has your income exceeding your outflow, after taxes and inflation. (Keep in mind that even if you are blessed to have a pension, it may not increase with inflation.)

When it comes to analyzing your spending, divide expenses into essentials (mortgage, utilities, etc.) and nonessentials (vacations, gifts, etc.), with the idea that you control when to spend for discretionary items -- you can delay vacations until you have funds to pay for them, for instance.

Next, you need to make sure you have a solid understanding of your investments. Will your investments (or annuities) create enough cash flow to fill the retirement income gap?

If not, you’ll need the answers to two questions:

1) “How much capital do I need to liquidate to cover the retirement income gap each year, after inflation and taxes?”

2) “How long will my capital last?”

Your financial adviser will address those questions with you. To do some of your own calculations, you can use a free retirement calculator (tinyurl.com/3e3wxvxs) provided by FINRA, the Financial Industry Regulatory Authority, which regulates the brokerage industry. By doing these calculations and running a number of scenarios, you can get a better understanding of your current financial preparation for retirement.

The point is to be prepared for the decisions that need to be made, including saving and investing more money now (if possible).

A 2021 Global Retirement Index survey of 8,550 investors by Natixis Investment Managers (tinyurl.com/6j8uw3c5) found that 40% admitted that “it will take a miracle” to retire securely.

“Hoping it will last.” Waiting for a “miracle.”

A better approach? Know your numbers. Do some planning.

On another note, the deadline is fast approaching to apply for this year’s 401(k) Champion® Award, which shines a light on 401(k) participants who make good 401(k) decisions. If you want to compete for the award, you have until Oct. 1 to fill out an application at 401kchampion.com.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

September is College Savings Month, time to think about how to pay for college.

This is no small issue. Funding a college education can be a significant concern, according to a recent Fidelity study (tinyurl.com/2cc8v5np), which surveyed high school students and their parents, along with recent college graduates and their parents.

Cost can be the most important factor in choosing schools for some (4 out of 10) high school students surveyed. So can student loans. One out of 4 high school students and 1 out of 5 recent graduates said their most important financial priority was “living debt free.”

Given that backdrop, parents and students need to understand this very important point. There are two ways to look at the cost of college: the “sticker price” and the “net price,” which is the actual cost to students after the impact of aid (including merit and need-based scholarships).

Let’s start with sticker price. The College Board’s “Trends in College Pricing and Student Aid” (tinyurl.com/3wcwmnhr) reported average published charges for tuition and fees (2020-2021) for public four-year in-state schools to be $10,560 for full-time students.

If you add room and board, you’re talking big bucks. Room and board was estimated at $11,620 for public schools in and out of state.

But, there is a lot more to this equation than meets the eye. Parents need to know that these are sticker prices, referred to by colleges as “cost of attendance (COA).” COAs usually include tuition and fees (for things like the use of the library and athletic facilities); room and board; books and supplies; and transportation and personal expenses.

Now let’s talk about net price. What’s not reflected in COAs? “Need-based aid, merit aid, and scholarships,” according to CollegeData.com, an online college adviser service.

In reality, the majority of students enrolled in colleges don’t pay sticker price, according to the College Board. During the 2019-2020 school year, undergraduate and graduate students received a total of $242 billion in student aid in the form of grants from all sources, Federal Work-Study (FWS), federal loans, and federal tax credits and deductions.

Looking at tuition and fees alone, a first-time student at a four-year, public, in-state school (sticker price: $10,560) can pay a net price of $3,230, according to the College Board. A private, nonprofit, four-year school with a sticker price of $37,650 could cost $15,990 (net price).

What accounts for the differences between prices? Undergraduate students in 2019-2020 “received an average of $14,940 per FTE [full-time equivalent] student in financial aid: $9,850 in grants, $4,090 in federal loans, $920 in education tax credits and deductions; and $80 in Federal Work-Study.”

It’s wise for high school students to keep costs at the forefront. Let me offer another piece of advice: Before making a cost decision, make a career decision and work backward. Find the best college choices based on what happens when you graduate. That is, will the experience lead to a career? Prepare a short list of colleges. Figure out the net price. Then, do a cost-benefit analysis, choosing the best education for the best price.

Check out the U.S. Department of Education website (ed.gov) for student loans and grants and get familiar with Fidelity’s tools such as the College Savings Calculator (tinyurl.com/2ea5zf2h).

College Savings Month is not the only savings-oriented occasion in September. Sept. 10 (“401(k) Day”) marked the opening of the annual competition for the title of “401(k) Champion®,” earned through an essay contest for 401(k) participants. This is a financial literacy event that I created along with my firm, Jackson, Grant Investments Advisers, Inc., to shine a light on 401(k) participants who make good 401(k) decisions. Apply at 401kchampion.com soon, well before the deadline of Oct. 1.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION