Frequently Asked Questions

Why are you called Northern Lakes Financial Group but everything is through LPL Financial?

Northern Lakes Financial Group is the name of our independent practice. We operate under that name locally, but we are affiliated with LPL Financial, one of the nation's largest independent broker-dealers. LPL Financial serves as our broker-dealer and registered investment adviser, which means your accounts, transactions, and investments are held and processed through LPL. Think of it this way: Northern Lakes Financial Group is your local team, and LPL Financial is the platform and infrastructure that supports us. This structure allows us to operate independently while giving our clients access to LPL's robust technology, research, and account services.

How are retirement accounts taxed?

It depends on the type of account. Traditional retirement accounts — such as traditional IRAs and 401(k)s — are typically funded with pre-tax dollars, meaning contributions may reduce your taxable income in the year you make them. However, withdrawals in retirement are taxed as ordinary income. Roth accounts work the opposite way: contributions are made with after-tax dollars, but qualified withdrawals in retirement are generally tax-free. Other rules, such as required minimum distributions (RMDs) and early withdrawal penalties, may also apply depending on your situation. We recommend speaking with a tax professional for guidance specific to your circumstances.

Can I have a 401(k) and an IRA?

Yes. Contributing to a workplace retirement plan like a 401(k) does not prevent you from also contributing to an Individual Retirement Account (IRA). However, your ability to deduct traditional IRA contributions — or contribute directly to a Roth IRA — may be affected by your income level and whether you have access to a workplace plan. Contribution limits for each account type are set annually by the IRS. A financial professional can help you understand how to coordinate these accounts as part of your overall retirement strategy.

What is does it mean when an account is Qualified or Non-Qualified?

These terms refer to how an account is treated for tax purposes. A qualified account is one that meets IRS requirements and receives special tax treatment — such as tax-deferred growth or tax-free withdrawals. Common examples include 401(k)s, IRAs, and 403(b)s. A non-qualified account does not receive those same tax advantages. Investment gains in a non-qualified account are generally subject to taxes in the year they are realized. Both types of accounts can play a role in a well-rounded financial strategy, and understanding the difference can help with tax planning over time.

What is a college savings plan?

A college savings plan is an investment account designed to help families set aside money for future education expenses. Funds in these accounts can typically be used for tuition, fees, books, room and board, and other qualified education costs. The most common type is the 529 plan, which offers tax advantages at the state and sometimes federal level. College savings plans vary in their investment options, contribution limits, and rules around withdrawals, so it is worth comparing options and considering your timeline and goals before choosing one.

What is a 529 Plan?

A 529 plan is a tax-advantaged savings account specifically designed for education expenses. Contributions grow tax-deferred, and withdrawals used for qualified education expenses — such as tuition, fees, and certain room and board costs — are generally free from federal income tax. Many states also offer a state income tax deduction or credit for contributions. Funds can be used at most accredited colleges, universities, and vocational schools, and in recent years the rules have expanded to include K–12 tuition and, under certain conditions, student loan repayment. Each state administers its own 529 plan, though you are not required to use your home state's plan.

What is the purpose of a financial plan?

A financial plan is a roadmap for your financial life. Its purpose is to help you understand where you are today, identify where you want to go, and map out the steps to get there. A good financial plan takes into account your income, expenses, savings, investments, insurance coverage, tax situation, and long-term goals — such as retirement, education funding, or leaving a legacy. Rather than reacting to financial events as they happen, a plan helps you make proactive, informed decisions. It is also a living document that should be revisited as your life circumstances change.

Isn't a financial plan part of investing anyway?

Investing is one component of a financial plan, but the two are not the same thing. A financial plan looks at your complete financial picture — including cash flow, debt, insurance, taxes, estate planning, and goals — and investing is one of the tools used to help you reach those goals. Someone could be actively investing without having a coordinated plan, and in doing so might take on inappropriate risk, miss tax-saving opportunities, or overlook gaps in coverage. A financial plan gives your investments context and purpose.

What are the types of financial plans?

Financial planning covers a range of focus areas, and a plan may address one or several depending on your needs. Common types include retirement planning, which focuses on building and distributing assets over your lifetime; education funding plans; insurance and risk management plans; tax planning strategies; estate plans, which address how your assets will be managed and transferred; and cash flow or debt management plans. Many people benefit from a comprehensive plan that integrates several of these areas, while others may focus on a specific goal at a given stage of life.

Why should I consider a Long-Term Care Policy?

Long-term care refers to the ongoing assistance people may need with daily activities — such as bathing, dressing, or managing medications — as a result of aging, illness, or disability. Medicare generally does not cover long-term care, and the cost of care facilities or in-home assistance can be substantial. A long-term care insurance policy can help protect your savings and give you more options for the type and location of care you receive. Planning ahead while you are still healthy typically means better access to coverage and lower premiums.

What's covered in a LTC policy?

Coverage varies by policy, but long-term care insurance typically helps pay for services such as care in a nursing home, assisted living facility, or memory care unit, as well as in-home care provided by a licensed caregiver. Some policies also cover adult day care services. Benefits are generally triggered when a person is unable to perform a certain number of activities of daily living (ADLs) — such as bathing, eating, or dressing — or when a cognitive impairment is diagnosed. It is important to review each policy's benefit triggers, daily benefit amounts, elimination periods, and inflation protection options carefully.

What factors should I consider before buying a LTC policy?

Key considerations include your age and health at the time of application, since both affect your eligibility and premium cost. You will also want to evaluate the daily or monthly benefit amount, how long benefits will last, the elimination period (similar to a deductible measured in days), and whether the policy includes inflation protection to help benefits keep pace with rising care costs. The financial strength and reputation of the insurance carrier matters as well. Because long-term care insurance can be a significant purchase, it is worth taking time to compare options and discuss the decision with a financial professional.

What are the different types of Life Insurance?

The two broad categories are term life insurance and permanent life insurance. Term life provides coverage for a specific period — such as 10, 20, or 30 years — and pays a death benefit if you pass away during that term. It is generally the most straightforward and affordable option. Permanent life insurance, which includes whole life, universal life, and variable universal life, is designed to last your lifetime and typically includes a cash value component that grows over time. Each type has different costs, features, and appropriate use cases, and the right choice depends on your goals, budget, and overall financial plan.

What are the disadvantages of Life Insurance?

Life insurance has real value, but there are trade-offs to consider. Premiums can be a significant ongoing expense, particularly for permanent policies or those purchased later in life. Permanent policies can be complex, with fees and surrender charges that reduce their value if you cancel early. The cash value component of permanent policies may grow more slowly than other investment vehicles. Additionally, coverage can be denied or limited based on health history. It is important to understand what you are paying for and to make sure a policy fits into your broader financial plan rather than purchasing it in isolation.