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America At War:
Financial Planning for Sept. 11 Victims
Color of Money
with Michelle Singletary
Post Business Columnist
Thursday, Oct. 25, 2001; 1 p.m. EDT
Close to and far away from Ground Zero there are what aid workers call collateral victims. For months to come we will begin to see the broader economic impact of the recent tragedy. If you are direct victims of the attacks, how has your financial world changed? How do you plan financially for the future when the unexpected occurs? Find out about free financial planning for victims of Sept. 11.
Welcome to The Color of Money with Post Business columnist Michelle Singletary. Join the discussion with Mark Johannessen, an former president of the National Capital Area Chapter of the Financial Planning Association (FPA).
Johannessen is one of the founding professionals of Sullivan, Bruyette, Speros and Blayney Inc., Financial Consultants, in McLean, Virginia. Specializing in retirement planning and asset management, he advises individuals, businesses and associations on a variety of financial planning issues.
He is an active member of the Financial Planning Association (FPA) and a member of the chapter's Past President's Advisory Council. He also contributes to the FPA nationally where he serves as a member of the Government Relations - Tax Subcommittee. In 2002, Johannessen will begin a three-year term on the Financial Planning Association's Chapter Advisory Council.
The transcript follows.
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Michelle Singletary:
It's that time again. Time to talk money. And, again this session the focus will be how to cope financially doing these tough times. so ask away.
Michelle Singletary:
What exactly is the Financial Planning Association doing for the victims of Sept. 11? How can the victims who were injured or the family members of those who died find a planner participating in the pro bono program?
Mark Johannessen: The Financial Planning Association has established a pro-bono financial planning program designed to help families directly affected by the tragedy. Locally there are more that 75 members who have volunteered to give their time to this effort. Nationally the association has established a call center and provided space on their Web site to communicate to victims and others who may have general questions regarding their personal finances in light of these events.
The national financial planning support center can be reached by calling(800) 647-6340. This line is designed to aid families and businesses directly affected by the terrorist attacks.
The Web address is www.fpanet.org for others . Visitors to the site can submit questions that will be answered by an FPA member.
Rockville, Md.:
What kind of information would you recommend having together in one place for your family to access in case of an accident or death? And where and with whom do you think it should be? My husband is clueless about this stuff and I'm not sure what he would do if something happened to me.
Mark Johannessen: Generally we advise families to have a centrally located file or notebook that includes a checklist of financial documents and where they are located (i.e. bank, brokerage firm, etc.).
Assuming you have a will with an executor or co-executor different from your husband, you should provide them with that information as well.
Specifically you should have information pertaining to:
Wills and Trusts, Life Insurance Policies, Bank and Brokerage accounts as well as informaiton regarding your liabilities.
Michelle Singletary:
What kind of pro bono financial services can families expect?
Mark Johannessen: It's important to realize that the family not make hasty major financial decisions such as changing investments, moving, changing jobs or retiring early, unless absolutely necessary.
With that in mind, families can expect to receive advice and consultation about important issues such as:
Medical, disability and/or life insurance benefits, settlements and claims administration.
Banking issues, payment of bills and budget and cash flow management.
Organization of family finances.
Working with legal, accounting, insurance and other allied professionals.
Coordination with relief agencies to access all available benefits to which the family may be entitled.
Michelle Singletary:
What would you recommend for the "collateral victims" of the attacks, those people who have lost their job or are faced with the possiblity of losing their job?
Mark Johannessen: For the collateral victims who face job loss, I would recommend that they take time now to look at their finances, particularly their assets/liabilities and spending, and put a plan in place in the event they lose their job.
Being proactive will help them tremendously if and when the pink slip is handed to them. It gives them a sense of control.
For those who have already lost their job, I would recommend keeping a close eye on their spending. Use cash assets to supplement cash flow first, followed by the most tax efficient investment assets they own.
To the extent that they need to borrow to meet cash flow needs, look for the least expensive form of credit (home equity). Use credit cards as a last resort.
Raleigh, N.C.:
Regarding the previous response concerning the various professionals who will be able to help, will they coordinate their efforts? And will the information you provide be held in confidentiality? I would not want to be indundated with "cold calls" from insurance agents, etc.
Mark Johannessen: The efforts to help the families is being coordinated by FPA in Denver. When a call comes into the center, trained staff will discuss the issues with the caller and then provide their name to volunteers in the appropriate city (New York as an example has 300 volunteers, DC 75)
The parties will all sign an engagement letter that outlines the scope. Your name will not be given to anyone other than the person you've who's contacted you. Confidentiality is part of our code of ethics.
Vienna, Va.:
Has your association helped victims of Oklahoma City as well? How do you assess the personal and property damages of victims (of Sept. 11)? Do they have access to a fund?
Mark Johannessen: The Financial Planning Association's pro-bono effort was formally rolled out on October 8, 2001 in response to the September 11 attacks.
Unfortunately we were not organized for Oklahoma City, but we are now prepared to respond as needed.
I'm not sure I understand the second part of your question, can you clarify?
Michelle Singletary:
With so many people losing their jobs either directly or indirectly because of the events of Sept. 11 there will be a greater willingness and need to dip into retirement accounts. What are the pros and cons of doing this. Is there a way to take about money from an IRA or 401 (k) without getting hit with a penalty?
Mark Johannessen: Most financial planning professionals would advise against dipping into their retirement accounts.
Generalizations are difficult today because there are so many different "retirement" vehicles (401k, Profit Sharing Plans, Traditional IRA, Roth IRA....)
Borrowing - Generally you would not be able to borrow from an employer that has let you go. IRA's do not allow for borrowing this year.
Depending upon their age the person may be able to use a favorable distribution method. But.... for most people under 55 it would be a big mistake to distribute funds from their retirement plans, due to the ordinary income taxes they would pay and the 10% penalty they would be charged. Depending on the tax bracket the individual could lose nearly 50% to taxes, making this an expensive form of money.
Washington, D.C.:
No offense, but how is financial planning going to help if I was laid off as a result of the attacks? I don't have any finances with which to plan?
Mark Johannessen: No offense taken.
Financial Planning whether done by you alone or by you with professional help can provide a sense of control to a situation that may otherwise be out of your control.
After looking at the your cash flow, the planner can help determine the best use(s) of the assets you have at your disposal. The planner can also help to lend objectivity at an emotional time.
Michelle Singletary:
There are going to be so many con artist out there trying to take advantage of people as a result of the terrorist attacks. How can people protect themselves against appeals to possibly buy more insurance they need or investment products that are not suitable for them?
Mark Johannessen: Great question,
The best protection against con artists is being in a place to make a good decision.
It is important for survivors to be able to make financial decisions in a safe environment, away from the clutter that implementation (buying life insurance or making an investment) may bring.
Implementation should occur only after a person has made decisions that are free of emotion.
Survivors should probably only make necessary financial decisions in the first year after a tragedy such as the one they've just been through.
Laurel, Md.:
How will you get this information to victims who do not have access to the internet? What financial advice can you offer to victims who has lost everything and do not have insurance, etc.? I am thinking of janitors, office cleaners, and temp employees.
Mark Johannessen: This will be a challenging situation for the volunteer planner, but one of the things the planner will be charged with is coordinating with relief agencies to access all available financial benefits.
If a person goes on line and wants information, they will be asked for their e-mail address and appropriate follow-up will begin.
Michelle Singletary:
Isn't a key to financial planning not just investing money you have but building a "plan" to accumulate assets in the future? And if that is so financial planning isn't just for the wealthy or employed.
Mark Johannessen: That's correct, financial planning is a process and investments are just on component of that process.
The public perceives that financial planning is only for the wealthy. Its not, Financial Planning is important for everyone.
Michelle Singletary:
I understand that you can make what would be a 60-day loan from your 401 (k) or IRA as long as the funds are put back before the 60 days is over. Is this wise? I'm sure a lot of people will feel tempted to try this.
Mark Johannessen: You may remove assets from an IRA in the form of a rollover for up to 60 days without being taxed on the withdrawal.
For the reasons discussed earlier, an IRA owner would only want to do this if they were very confident that the funds could be returned within the 60 days.
Raleigh, N.C.:
To your knowledge, has the FPA discussed suggesting to President Bush lowering the age for accessing IRAs, etc. (on a temporary basis or for a specified period)?
Mark Johannessen: To the best of my knowledge the FPA government relations department has not discussed lowering the age for accessing IRA's.
Michelle Singletary:
Right now with all these scares about Anthrax many people are wondering how much life insurance they should have? Is there a rule of thumb for how much insurance one should have?
Mark Johannessen: I don't really have a rule of thumb for how much insurance one should have. Each family will have a different level of need based on their spending and assets currently saved.
A bigger question that could loom for this current scare and other terrorist acts is whether or not the insurance carriers will continue to cover acts of terrorism (or war) and what impact that could have on the family.
Michelle Singletary:
Can you clarify how victims without computers can access the pro bono services offered by the association. And, where should those victims that have lost jobs start in terms of getting benefits.
Mark Johannessen: The relief hotline can be reached by calling (800) 647-6340. I would use this for both victims directly and collaterally affected by the attacks.
Michelle Singletary:
I just want to thank Mark Johannessen for being my guest today. And, thanks to all who sent in questions. In the coming weeks and months I will continue to address issues surrounding our current economic conditions. So, please join me back here in two weeks.
Michelle Singletary:
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