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1. How Are Your Social Security Benefits Calculated?
We all think we know the basics about Social Security, but do we really know how different the benefits can be? The standard retirement age is between 65 and 67, depending on your birthday. Your monthly income, also called your PIA, is determined by your highest 35 years of indexed earnings. You can start taking benefits as early as age 62, but your monthly income will be reduced by at least 25%. Say your full retirement age is exactly 66 years old, then you can delay until age 70 and your monthly income will be 32% higher. Your strategy needs to be based upon a number of factors: how much retirement income you need, other sources of income, income taxes and your general health condition. Other factors also weigh in, like survivor needs, divorce, dependent children, and available liquid assets. Proper planning requires attention to all these details. Give us a call today for help with planning your Social Security strategies.
2. How To Strategize for Your Social Security Benefits
As life expectancy has grown, your retirement now can last between 20 and 30 years. So Social Security planning is critical, no matter how much money you have. It can make a difference of hundreds of thousands of dollars. For example, if you retire at age 62 and pass away at age 86, you’ll receive at least 25% less for 24 years. But, if you wait to retire at age 70, you’ll receive 32% more for 16 years. If your retirement income at age 66 was $2,000 per month, this could be a difference of over $200,000 during your lifetime. Arriving at a decision on when to retire is not easy. If you retire early, it could affect your spouse’s benefits. And wages and other taxable income could cause up to 85% of your Social Security benefits to be exposed to income taxes. Proper planning takes all of these factors into account to determine a Social Security strategy. For instance, a repositioning of assets could reduce taxable income and provide for more reliable monthly income. With over 500 different combinations of factors affecting benefits, it makes sense to talk to a financial advisor and get it right.
3. What are Required Minimum Distributions and How Are They Determined?
4. How to Protect Yourself From Identity Theft
What is the real cost of identity theft? It goes beyond just financial loss.
In the past, identity theft happened when someone stole your wallet or picked through your trash or your mail. Today’s theft is much more sophisticated. Today, it’s cyber crime, and there are over 1.5 million victims daily. The information targeted is your bank account information, Social Security number, or credit card information. Computers, smart hones, and even hacked ATM machines are sources under attack. Sometimes it is beyond your control. Even big, reliable companies have their systems hacked. Beyond the financial costs, there are legal costs and time needed to restore your good credit. It can take years to recover. In the meantime, your credit rating may be affected, disqualifying you for loans, or your employment may be affected. There are several steps you can take to help protect yourself. You need strong online passwords that include upper and lower case letters, numbers, and symbols. Do not provide financial information on public networks and use only reliable websites to purchase goods. Early detection is critical, so monitor your financial statements weekly. Freeze accounts if you suspect any irregularity and set up alerts when activity falls outside of set parameters. We can help provide you with resources and guidance so that you can protect your accounts from identity theft.
5. How to Allocate Assets Within Your Portfolio When You Retire
If you’re nearing retirement, you may need to consider asset allocation in a different way. Be aware that asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. When you were younger, you may have invested in stocks and mutual funds for the growth and perhaps the diversification offered. You had time on your side. You invested for the long haul and could weather the ups and downs of the stock market. But when you’re nearing or in retirement, the ground rules change. Losses are difficult to recover and your income stream could suffer just when you’re counting on it. Often, a balance between stocks and bonds is used because these investments usually move in opposite directions. This is where asset allocation comes into play. Because investments may go up and down, and your financial needs may vary, your planning must allow for contingencies. Various types of investments can help accomplish this. By allocating investments for growth potential, guaranteed income, risk management, and taxes, we can develop a strategy to help you meet your financial goals. Please give us a call today to find out how you can allocate your assets for your retirement.
6. What is an Annuity and How Does It Guarantee Income?
7. Is Estate Planning Only For The Rich?
You’ve worked so hard to build your net worth, but it could fall into a sinkhole if you don’t do estate planning. Estate planning isn’t just for the rich, it is a necessity for everyone, and estate plan will allow you to pass along what you own to whom you want to receive it, the way want them to receive it, and when you want them to receive it. A will is a good start. Seventy percent of Americans with children under 18 in the household don’t have wills. If you don’t make a will, the courts may decide the distributions of your assets for you. The will should take into account all you own and all the potential beneficiaries. One element of the will should be the living will, where you specify medical directions for life support by artificial means.
Another element of the will should be durable power of attorney; this allows someone else to act on your behalf in case you are incapacitated. It’s important that all investment titling and beneficiary designations are working in concert with your will or other estate planning documents. Speak with your estate and tax planning professionals to evaluate any potential tax ramifications and call us today to learn more about strategies and resources that may help you preserve your nest egg.
8. The 3 Stages of Your Financial Life
9. What is a Rider and How Can It Help You Save on Insurance?
10. How Does Insurance Work?
11. Why You Need a Living Will
12. Do You Need a Durable Power of Attorney?
13. What’s the Difference Between a Will and a Living Trust?
A “Living Trust” is a trust you created that is active while you are alive versus a Testamentary Trust which becomes active at your death. When you create a Living Trust, you ensure that your assets will be disbursed efficiently to the people you choose after your death. The big advantage to a Living Trust is that the trust doesn’t have to go through probate court like a will does. Probate can be expensive in attorney and court costs while also causing long and frustrating delays. A Living trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can even act as your own Trustee if you’d like. When you create a trust, the titling of assets is changed into the trust’s name, as if it was a living entity. Specific details of your wishes upon death can be provided for in the trust. But not everyone needs a trust. Transfer of assets at death may be handled through a beneficiary designation on some holdings and investments. If you’re using beneficiary designations, make sure all your paperwork is up to date. For instance, if you get divorced, be sure to remove your ex-spouse as a beneficiary. For more information about how to plan well for your family’s future, give us a call today.
14. How to Choose a Financial Advisor
15. How to Set and Keep Financial Goals
16. How to Control Your Debt
17. How to Double Your Money
18. Understanding Your Credit Score
19. Tax Planning: How to Prepare for Taxes at the End of the Year
20. How Dollar Cost Averaging Can Help You Make Smart Investments
Dollar cost averaging is a stock market investing technique where you buy a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low and fewer shares are bought when prices are high. This can help reduce the impact of volatility or price swings on purchases of financial assets. For instance, say you plan to invest $500 over a five-month period. So that would be $100 per month. Let’s say your stock’s price varies month to month as follows: $5, $8, $5, $3, $5. You would have bought this many shares each month: 20, 12.5, 20, 33.33, 20. Mathematically, the average share price would have been $5.20. With dollar cost averaging, the average per share cost would be $4.72. So you save $0.48 per share despite taking advantage of market variations. This method does not account for the value of time or for long protected trends. Always seek a professional to develop an investment plan that fits you and your circumstances. Periodic investment plans, such as dollar cost averaging, do not assure a profit or protect against a loss in declining markets. This strategy involves continuous investment so the investors should consider his or her ability to continue purchases through periods of low price levels. We can help so give us a call today.
21. Do You Have to Take Your Required Minimum Distribution?
23. What’s the Best Way to Set Aside Funds for Future College Costs?
24. How Can You Plan for Long-Term Care?
Statistics say there is a seventy percent chance that you or your spouse will experience a need for long-term care! Long-term care includes a range of services and supports you may need to meet your personal care needs. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (or ADLs). These include Bathing, Dressing, Using the toilet, Transferring to or from bed or chairs, Caring for incontinence, and Eating. Other common long-term care services and supports are assistance with everyday tasks, sometimes called Instrumental Activities of Daily Living (or IADLs) These include Housework, Managing money, Taking medication, Preparing and cleaning up after meals, Shopping for groceries or clothes, Using the telephone or other communication devices, Caring for pets and Responding to emergency alerts such as fire alarms. The cost of Long-Term care varies with the amount of coverage, length of care, and deductibles. The initial premium level will increase based upon the age at which you apply. Like all insurance, most people wait too long before applying. 1 in 4 who apply between the ages of 60 and69, don’t qualify. You owe it to yourself and family to know the options and prepare well today. Call us to find out more.
25. How Will Divorce Affect Your Finances?
26. What Can Indexed Annuities Do For You?
27. Why is Laddering a Smart Strategy For Your Finances?
28. What is a 1035 Exchange?
30. Reverse Mortgage – Is it Right for You?
In a “regular” mortgage, you make monthly payments to the lender. In a “reverse” mortgage, you receive monthly payments from the lender, and generally don’t have to pay it back for as long as you live in your home. You are basically taking equity out of your home in the form of monthly payments made to you. The loan is repaid in full when you die, sell your home, or when your home is no longer your primary residence. If you make more money on the sale of your home than was required to pay off your mortgage, you get to keep the proceeds. These proceeds are generally tax-free, and many reverse mortgages have no income restrictions. If you’re 62 years old or older – and looking for money to finance a home improvement, supplement your retirement income, or pay for healthcare expenses – you may want to consider a reverse mortgage. It’s a product that allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. These reverse mortgage loan advances are not taxable, and generally don’t affect your Social Security or Medicare benefits. Terms and conditions can vary widely among lenders. A reverse Mortgage may help fill in the gaps of retirement income shortfalls. Give us a call today to find out if a reverse mortgage is right for you.
31. How Do You Create a Simple Retirement Income Plan?
32. When Does a Roth Conversion Make Sense?
33. How to be Tax Efficient with Your Investments?
34. How Can You Take Care of Your Spouse Just in Case Something Should Happen to You ?
35. Your Spouse Just Passed Away – What Should You Do?
36. When Should You Consider a Life Settlement?
37. How Would an Irrevocable Life Insurance Trust Benefit You?
38. Are Target Date funds Right for You?
As we near retirement, the ability to recoup investment losses becomes critical. Therefore a strategy to reduce risk as you near retirement should be targeted. Target Date Funds, which are usually mutual funds, self-adjust their portfolio based upon a fixed date. As time passes, exposure to stocks is replaced with an increasing use of bonds. Each fund has a designed Glide path to allocate funds. Think of an airplane coming in for a landing. Most of the flight is high (meaning it has more risk) and as the target date approaches the plane takes a steep glidepath to approach the landing. These funds relieve you the task of frequently reallocating your investment as you approach retirement. They should be used over a long investment horizon. Call us today to determine if this strategy might be appropriate for you. For an explanation of Target Date Funds visit http://www.dol.gov/ebsa/pdf/TDFinvestorbulletin.pdf
39. When is the best time to retire?
40. How Can Social Security and Retirement Planning Work Together for Your Benefit?
Many people believe Social Security will pay for their retirement, but Social Security was designed to be just a complement to a pension and investments. So don’t rely only on Social Security for your retirement because it probably won’t be enough to maintain your current lifestyle. However, planning for your Social security benefits is important. Many retirees decide to wait until age 70 to draw on Social Security benefits because you can increase your benefits significantly by delaying the age at which you retire. However, remember, at age 70 ½, you must begin taking the required minimum distributions from an IRA, which also adds to your taxable income. Be aware that in retirement, tax deductions may be reduced, resulting in more taxable income.
You can plan for your Social Security, investments and pensions to all work together to reduce your tax burden. Sustainable lifetime income is the goal so you need to have a plan for all sources of income to work together in your retirement. Need help with your plan? We can work with your tax professional in order to help you develop a Social Security strategy. Call us today. We’re here to help.
41. Is A Tax Free Retirement Possible?
A question we’re commonly asked is, “Is it possible to drastically reduce taxes in retirement, or even eliminate them? It’s possible, but you must start planning before you retire. Many people don’t realize that Traditional IRAs and 401(K)s are fully taxed upon withdrawal, so the key is to diversify your retirement income. You can do that by saving and investing in tax-advantaged and non-taxable accounts, such as a Roth IRA, while you’re still working. Once you’re retired, it’s all about monitoring your adjusted gross income to control your tax bracket. You can limit the amount of taxable income you need to withdraw by pulling income from your tax-free accounts. Also, by withdrawing from non-taxable accounts, instead of selling investments that trigger taxable income, you reduce the amount of your Social Security benefits subject to income tax. To find out how you can reduce your taxes in your retirement years, call us, or visit our website today.
42. Don’t Let Timing Ruin Your Retirement
43. Is Tax Planning missing in your Retirement Planning?
Too many retirees believe that they don’t have to do any planning in retirement. They spent years saving for their retirement and now they think they can coast. WRONG! There are hidden tax traps waiting for the unsuspecting. For instance, If you want $75,000 per year in retirement, is that before or after taxes? If it’s after taxes, that could mean withdrawing $90,000 per year before tax. Will your portfolio last for 35 years if you withdraw $90,000 each year adjusted for inflation? After 15 years, to keep your purchasing power of $90,000 at 3% inflation you would need to withdraw $140,217! To find out more about planning during your retirement years, give us a call or visit our website today.
44. Do you Know the Silent Killer for Retirees?
45. How to make your retirement tax free
46. Which Retirement Plan Should I Choose
Choosing a retirement plan is a great step toward financial security. There are several types available, but here are the most common: 401(k)s and 403(b)s are plans offered by employers. 401(k)s are offered by for-profit companies, and 403(b)s are offered by public schools and some non-profit organizations. Contributions are deducted from your paycheck, and are often matched by employers. They’re deducted pre-tax, grow tax-deferred and are taxable on withdrawal. Traditional IRAs, or Individual Retirement Accounts, are opened by individuals through an investment firm or bank. They may be tax deductible, grow tax-deferred and you pay tax when you take the money out. A SIMPLE IRA plan is similar to a traditional IRA, but these accounts are set up by a small business owner, and usually permit larger contribution amounts. And lastly, when you open a Roth IRA, you contribute after-tax dollars, the money grows tax-free, and you pay no tax on withdrawals. All these types of accounts have their own set of rules on eligibility, contribution amounts and withdrawals. For more information on retirement plans – give us a call today, or visit our website!
47. 5 Important Medicare Facts for Pre-Retirees
Most Americans who turn 65 are eligible for Medicare, a federal program that covers many health expenses for seniors. But the program is complicated. Here are 5 important facts you need to know: First – Medicare is not free. Of the 4 parts, Part A – Hospital Insurance – is the only one that normally has no premium. Parts B, C and D have premiums that vary. Second – Enrollment is not automatic – you have to sign up for Medicare benefits. The exception is for those already receiving Social Security benefits. If you’re already receiving Social Security benefits, you will automatically receive Medicare Parts A and B. Third – Late enrollment can mean expensive, and permanent, premium penalties. You have 7 months, starting 3 months before your 65th birthday month, to sign up penalty-free. Fourth – Medicare covers a lot, but not everything. Services like long-term care, dental and vision care are not covered. People often purchase additional private coverage for these types of services. And fifth, if you’re rich you’ll pay more. High-income seniors pay surcharges on premiums for both Parts B and D. Let us help you with your important Medicare decisions – give us a call or visit or website today!
48. How Do I Choose Medicare Coverage When I Retire?
49. 3 Ways to Boost Your Social Security Benefits
A question we hear often is “Is it possible to increase my Social Security benefits?” The answer is yes, there are 3 basic ways you can boost your benefits; work more years, earn more in annual income, and claim benefits later. [1 – Work More Years]- Social security benefits are based on an average of your 35 highest earning years. By working more years, you can replace any zeros from missed years, or lower wage years, to create a better base for your benefit calculations. [2- Earn More Income] The Social Security formula is based on earnings, up to a designated limit, each year. That limit can change. In 2003, for example, that limit was $87,000. In 2016, the limit was $118,500. If you’re earning less than the annual limit, a higher working income will help you increase your benefit. Working overtime, extra hours, or taking a second job are all ways to boost that annual income. [3- Claim Later] You can claim benefits as early as age 62, but the longer you wait, the higher your monthly benefit will be. The difference in income when added up over a lifetime can be enormous. For more information on how to maximize your Social Security benefits, please call or visit our website today.
50. How To Maximize Social Security Survivor Benefits
Many people overlook the importance of benefits for the surviving spouse when they initially file for Social Security. Postponing collection of benefits can earn workers 8% in delayed retirement credits every year from full retirement age to age 70. Since survivor benefits will reflect any delayed credits, this is a very important strategy for the higher earning spouse.
If the higher earning spouse dies first, the higher benefit transfers to the survivor and continues for the rest of their life. Even if the higher earning spouse dies before ever claiming a benefit, those credits earned will still boost the survivor benefits. To be eligible for survivor benefits, the survivor had to have been married for at least 9 months, or be a caregiver of the deceased’s child under age 16. The surviving spouse can claim survivor benefits as early as age 60, 50 if disabled, but the benefit will be reduced. By waiting until full retirement age, the surviving spouse can collect 100% of the late worker’s benefits, including any delayed credits. Decisions on when to begin receiving Social Security benefits have a lifelong impact for you and your spouse – so call us today for more information.
51. Have You Protected Your Financial Accounts From Hackers?
52. 7 Steps to Protect Your Small Business from Cyber Thieves
Small businesses are increasingly under attack from cyber thieves. Adopting cybersecurity policies will help keep your company safe from fraud. First, educate employees on using strong passwords, and avoiding suspicious emails, links and downloads. Second, put up a firewall to protect your network by controlling internet traffic flowing in and out of your business. Third, install anti-virus and anti-malware software. Fourth, consistently update all hardware and software for important security fixes. Fifth, secure company smart phones and laptops with encryption software, password protection and remote wiping capabilities. Sixth, back up company data consistently to a secure off-site location. And lastly, create an incident response plan outlining how staff can detect and contain a cyber breach. For more information on how to protect your business and financial accounts from fraud, call us or visit our website today.
53. Should I Invest in an IRA or 401(k)?
54. Are You Financially Prepared for an Emergency?
55. 5 Steps Toward a Debt-free College Education
Too many young people can’t afford college, and many more leave college under a mountain of debt. Here are 5 ways to plan for a debt-free education. First, invest early in college savings plans like 529s or state prepaid tuition plans – parents and grandparents can participate. Second, avoid loans if possible – they’re easy to obtain but difficult to get out from under after graduation. Third, start your scholarship search early – you’ll have time to learn the requirements and boost your chances through academics or other activities. Fourth, dual enroll or take advanced placement courses in high school – you’ll get college credits for free or very low cost. Fifth, stay local – attend a state community college and then transfer. The tuition is lower than most private schools, and you’ll save money if you can live at home for a few years. Also, while relocating may not be an option, keep in mind that some cities and states, like San Francisco and New York, offer free college tuition – although restrictions apply. Everyone should have a chance to attend college – to find out more on how to fund a college education, give us a call or visit our website today.
56. How to Avoid an IRA Rollover Mistake
If you’re changing jobs or retiring, it’s important to know the rules regarding moving funds from your employer sponsored retirement plan. The wrong move could cost you in income taxes and early withdrawal penalties. There are two basic ways to move retirement plan assets from one retirement plan into another with no tax consequence. With a direct rollover your financial institution or plan directly transfers the payment to another plan or IRA; no taxes are withheld and your account continues to grow tax-deferred. With an indirect rollover, a check is made payable to you. You have 60 days to deposit it into a Rollover IRA – after that the entire amount is considered income, and subject to taxes. You could also face a 10% early withdrawal penalty, depending on your age. And, indirect rollovers are subject to 20% withholding. For example, if you had $10,000 eligible to rollover, your employer would withhold $2000 and you’d get a check for $8,000. The $2000 withheld counts as income taxes paid, but in 60 days you still have to deposit the entire $10,000 in a rollover account – the $8,000 from your employer plus $2000 from your own resources. To learn more about how to avoid complications with a retirement plan rollover, give us a call today.
57. Why is Asset Allocation Important to Investing?
58. What’s Your Risk Tolerance?
Risk tolerance is the level of risk, or market ups and downs, an investor is willing and able to tolerate. An aggressive investor, one with a high risk tolerance, is willing to risk greater loss to potentially maximize returns, while a conservative investor prefers investments that have a lower risk of negatively impacting the portfolio’s value. It’s important to understand your own risk tolerance when building an investment portfolio so that you won’t over-react during market swings. The first step toward gauging your risk tolerance is to outline your financial goals, such as saving for college, a car or a new home. Then create a timeline for when you’ll need the money – lower-risk investments are best for short-term goals, since there’s little time to recover from loss. Keep in mind that investments with very low risk will grow more slowly, and could even lose purchasing power due to inflation and taxes. Also consider your personal comfort level in investing – can you sleep at night with the choices you’ve made in times of market volatility? To learn more about how risk tolerance affects your investment strategy, please call or visit our website today.
59. Should You Invest In Stocks or Bonds?
Stocks and bonds are two of the most common investment asset categories. When you invest in more than one category, you reduce your overall investment risk, so many people add a mix of both stocks and bonds to diversity their portfolio. The right mix depends largely on your financial goals, because these two asset classes play different roles. Stocks are a form of ownership – a company sells shares to raise money. When you purchase a share of stock, you’re purchasing an ownership stake in the company. Bonds represent debt – a government or company issues a bond, or an I.O.U., to raise money with the promise to pay back your original investment, along with regular interest payments. The volatility of stocks makes them riskier than bonds, but they also offer the greatest potential for growth, especially in the long term. Bonds may offer more modest returns, but are typically less volatile than stocks and are also advantageous for their income from the interest payments. For more information on the right investment mix for your financial goals, please give us a call or visit our website today.
60. Small Cap versus Big Cap Stocks
Spreading your investments over different asset classes like stocks and bonds is one way to diversify your portfolio. But you can also diversify through different types of stocks, such as large cap and small cap. Cap stands for capitalization, or the company’s market value, which is determined by the number of outstanding shares times current share prices. Large cap companies, often called ‘blue chip” are worth $10 billion or more, and tend to be household names like Apple, IBM and Walt Disney. These companies are likely to be more stable, offer conservative growth and usually issue steady dividends. They are often the mainstay of a portfolio. Small cap companies are usually valued at under $2 billion. Often called “growth stocks”, they can gain profit quickly in particular industries, but they also represent greater risk. Adding a mix of both small and large cap stocks can help create a diverse portfolio seeking to conserve capital, provide income and build wealth over the long term. For more information on the right asset mix for your portfolio, give us a call or stop by our website today.
61. Four Basic 1031 Exchange Rules for Real Estate Investors
If you own investment property, you need to know how the IRS Section 1031, commonly referred to as a 1031 exchange, can work for you. A 1031 exchange is a strategy that allows an investor to defer capital gain taxes by selling a property and then reinvesting the proceeds into a new, like-kind property. Here are the basic rules of the 1031 exchange: First, the taxpayer who sells must be the same taxpayer who buys; Second, you must identify the new property within 45 calendar days after closing on the first property; Third,- you must purchase the replacement property within 180 calendar days after closing; and fourth, the replacement property price must be equal to or greater than the old property. If the new property price is less than the old one, the difference may be taxed. A 1031 exchange can be a powerful tax-deferment strategy offering many opportunities to investors. To learn more, give us a call today.
62. 5 Common Mistakes to Avoid in Retirement
63. How to Plan Ahead in Caring for Aging Parents
Today’s longer lifespans have left some baby boomers in the difficult position of planning for retirement, helping their children and caring for aging parents simultaneously. Giving advice to aging parents on their finances and other matters can cause conflict. To ease the way, start the conversation long before a crisis occurs by asking for copies of documents you might need someday such as property deeds, birth certificates and insurance policies. Also keep updated information on retirement plans and pensions, Social Security and health insurance. Ask your parents to create a living will, outlining their health care wishes, and appoint a health care proxy, or person, to carry out those wishes in case they’re unable to communicate. They may want to also have a living trust, which is a legal document that places their assets into a trust for their benefit while alive, and transfers them to beneficiaries when they die. If your parents become ill or incapacitated, the trustee can immediately take over financial decisions. For more information on caring for aging parents, call us or stop by our website.
64. Two Important Steps Toward Emergency and Disaster Planning
If you faced sudden evacuation of your home, would you be prepared to grab all your important documents and items on your way out the door? Few of us would be clear headed enough to know what we need, and where to find it, in a time of crisis. Here are two important steps to take well in advance of any possible emergency: First, create an inventory of your home possessions, inside and out. Document this in a formal list, and take photos or videotape for insurance purposes. Include values, model and serial numbers, receipts and appraisals whenever possible.
Second, assemble an Evacuation Box to store key documents and items like cash, wills, bank account numbers, computer backups and medical information. Make sure your box is durable and lockable, and store it near an exit for quick access. Preparing for an emergency can help lessen its financial impact. For more information, call us or drop by our website.
65. What Can You Do with an Inherited IRA?
66. How Compound Interest Pays Off
Whether you’re saving for a new car, home or retirement, compound interest is your friend. By definition, compound interest is interest earned on the principal amount plus the interest that was paid earlier. Let’s say you put one thousand dollars into a bank account or investment product offering 5 percent interest per year. By the end of year one you’d have one thousand fifty dollars. At the end of year two you’d earn interest on the entire one thousand fifty dollars, bringing your balance to one thousand one hundred and three dollars. All this happened because your interest received interest – in other words, it compounded. If you left that thousand dollars to compound for ten years – your balance would be one thousand six hundred and twenty nine dollars. And that’s the power of compound interest – you build wealth with very little effort. Another bonus is that the more frequently compounding occurs, the more interest is earned. For instance, if your bank paid interest monthly instead of annually, that year two balance would be one thousand one hundred and five dollars. By year 10? One thousand six hundred and forty seven dollars. While it may not seem like a huge amount, the longer you have to save, the more compounding can help grow even small sums into significant savings. To learn more about how to harness the power of compound interest – give us a call today!
67. Is (a Little) Debt a Good Thing?
68. How to Create a Simple, Effective Budget
Many people tend to avoid the “b” word – Budget! But a budget is really a spending plan that gives you control over your finances by tracking what comes in and what goes out. It’s that simple, and it doesn’t need to be fancy. It could be just two columns titled Income and Expenses. Start by tracking all your expenses. Include essential costs like rent, groceries and medicine, as well as non-essential expenses, like cable TV, entertainment and travel. Next, add up all your income, such as your salary or paycheck after taxes, and any other income including child support, investment or rental income. Then subtract your expenses from your income. A breakeven or negative number means it’s time to take a closer look at cutting non-essentials, or trimming where you can. With a clear picture of your income and expenses, you can adjust your spending to begin saving for important financial goals like an emergency fund, college or retirement. Review your budget every few months and adjust accordingly. Your budget should be flexible enough to change with your needs.
To learn more about saving for your financial goals, give us a call or stop by our website today.
69. It’s Time to Start Your Emergency Fund
70. Roth IRA – Convert or Contribute?
Roth IRAs are funded with money that you’ve already paid tax on, and then they grow tax-free. This is different than traditional pre-tax funded retirement accounts.
Roth IRAs offer many advantages that other traditional retirement accounts don’t. First, you can withdraw your money tax-free during retirement, which allows you to manage your taxable income. And second, with no annual distribution rules, you’re free to take your money out only when you want to. There are two ways to put your funds into a Roth IRA; through contributions and conversions. Contribution rules include contribution limits. For several years the annual limits have remained at five thousand five hundred dollars, or six thousand five hundred dollars if you’re over 50. And to contribute money to a Roth IRA, you must earn compensation, or income, but remain below IRS mandated income levels. High earners can’t contribute. Conversions have very few limitations. Anyone can convert an account such as an IRA, 401(k) or SEP IRA into a Roth IRA. You don’t need to have income, but if you do, there’s no income limit and there are no restrictions on the size of the conversion. You can convert one million dollars if you like! You will, however, owe income tax on any amount that you convert, so conversions should be scheduled when your tax rate is lowest. To learn more about Roth conversions and contributions, give us a call today.
71. Repayment Plan Offers Relief from Federal Student Loan Debt
If you’re struggling under a load of federal student loan payments higher than your income, there is some relief. The US government offers four income-driven repayment plans that can change your monthly payments based on your income and family size. Generally, your payment amount under each one of these plans is a percentage of your discretionary income, or income after paying taxes and for personal necessities. With the REPAYE Plan, you pay about 10 percent of your discretionary income. With the PAYE Plan, your payment amount would also be 10 percent of your income, but never more than the 10-year Standard Repayment Plan, which is a basic repayment plan of fixed payments for 10 years. The IBR Plan offers the same payment arrangement as the PAYE if you’re a new borrower starting on or after July 1, 2014, and 15 percent payments if borrowed before that date. With the ICR Plan you pay the lesser of either twenty percent of your discretionary income, or what you would pay on a repayment plan with a fixed payment over 12 years. This plan is also an option for Parent Plus Loans borrowers. Since all plans have different eligibility requirements and payment periods, it’s important to check with your loan servicer to find out which one is right for you. If you would like to learn more about managing your debt, please call our office today.
72. What is an Equity Glide Path?
73. Protect Your Portfolio With Diversification
Just like the old warning against putting all of your eggs in one basket, if you put all your money in one company stock and it dropped like a rock, you’d lose everything. Diversification can help protect your portfolio from that scenario. Diversification is the practice of spreading your money among different investments to reduce your risk of losses. A portfolio should be diversified at two levels; both between asset categories, such as stocks, bonds and cash; and within those asset categories. Ideally, if one investment is losing money, another will be making gains. To diversity between asset categories with stocks holdings, for example, you’d invest in a wide variety of industry sectors, such as energy, technology, financials, health care and utilities. Then you would diversify again, within those sectors. There are many ways to diversify within sectors: invest by company, such as Google or Apple in the tech sector; by geographical market, like domestic or international or by company size, large-cap, mid-cap or small-cap. Many people choose to diversify their portfolios with mutual funds or Exchange Traded Funds. These funds hold shares in a variety of companies, making it easier for investors to own a small portion of many investments. For more information on how to achieve a diversified portfolio, give us a call or stop by our website today!
74. Understanding Home Equity Loans and Credit Lines
When looking for cash to cover a major expense such as home improvements, a child’s college education or high interest debt, some people consider tapping into the equity of their home. Home equity is the market value of your home, minus any mortgages outstanding. For example, if your home’s market value is three hundred thousand dollars and you have a mortgage of two hundred thousand dollars, your equity is one hundred thousand dollars. Your home will be used as collateral to secure the financing. This is known as secured debt, and lenders tend to charge lower interest rates than with unsecured debt like credit cards. This makes home equity financing a more attractive source of funds. But, failure to pay the lender puts your home at risk. A lender will offer home equity financing in one of two ways; as a loan or a line of credit. With a home equity loan, the lender advances you a fixed amount of money upfront. You repay the loan with monthly payments over a fixed term, or risk foreclosure on your property. A home equity line of credit, or HELOC is a revolving line of credit, with similar terms to a credit card. You have a credit limit and can borrow what you need, when you need it, and only pay off what you’ve borrowed. A home equity loan or line of credit can be a good source of funds in the right situation, just remember that the loan is secured by your home and puts your home at risk. To learn more, give us a call today.
75. How to Manage Your Credit Score
You may be thinking about making a big purchase in the next few years, like a house or a car. If you’ll need a loan, know that prospective lenders will be checking your credit score. A good score tells lenders and others, like insurance companies, that you’re credit worthy, and it may help the terms you’re offered or the rate you’ll pay for the loan. Scoring systems are complex and vary among lenders, but here are some things they’ll consider: • Do you pay your bills on time? Always pay your bills on time, as late payments could negatively affect your score. • How many accounts do you have? A few established accounts tally in your favor, but too many can hurt your score. • How long have you had credit? Your credit score relies on the number of credit lines you have open in good standing and the length of time they’ve been open. • Are your accounts are maxed out? Try not to carry balances of more than 50 percent of your credit limit on any account or it might lower your credit score. Your credit report is a key part of many credit scoring systems. That’s why it is critical to make sure your credit report is accurate. You can order a free report each year from the three reporting agencies, Equifax, Trans Union and Experian. (access them all at once on annualcreditreport.com) To learn more about credit reports and managing your score, give us a call today.
76. How to Avoid Medical Identity Theft
Medical identity theft is a serious, and growing, business. One study reports that over 2 million cases are identified each year and the number keeps rising. When thieves steal your medical identity it can endanger not only your finances but also threaten your health. They may use your name or health insurance to see a doctor, get prescription drugs, file phony claims with your insurance provider, or illegally acquire government benefits such as Medicare or Medicaid. If their health information is mixed with yours, your medical treatment, insurance and credit report may be adversely affected. Some warning signs of medical identity theft include a bill for services you didn’t receive, a debt collection company calling for money you don’t owe or your insurance company telling you you’ve reached your limit on medical benefits. Here are some steps to avoid medical identity theft: Protect your Medicare and other health insurance cards and review your medical bills regularly for suspicious charges. Beware of offers of free medical goods or services in exchange for your Medicare number. Shred all papers with your medical identity, and, destroy labels on prescription bottles before throwing them away. For more information on how to protect yourself from identity theft, please give our office a call today.
77. Do I Need Life Insurance, and if So, How Much?
78. What Type of Life Insurance Do I Need?
A life insurance policy protects your loved ones against the loss of your income after your death, and helps to preserve their standard of living. You’ll name a beneficiary to receive the proceeds, and in exchange, you’ll pay premiums as outlined in the policy terms. Once you’ve determined how much you need, factoring in future expenses and current debts, you need to decide on one of the four types of life insurance: term, whole, universal or variable. Term life insurance covers you for a specific period of time, like one, two, ten or twenty years. The death benefit is paid only if you die within the policy term. Premiums generally start out lower, depending on your age, which allows you to buy more coverage. Whole life or “permanent” insurance covers you as long as you pay your premiums. The policy accrues a cash value that you can collect if you terminate the policy. It pays a fixed amount on death, and premiums are usually higher than for term insurance. Universal life insurance is also “permanent” but this option offers greater flexibility than whole or term. You can increase or decrease the cash value and death benefit if your needs change, with a related rise or drop in premiums. Variable life insurance is another type of permanent life insurance, but with an investment component. The cash value is invested in sub-accounts similar to mutual funds. Variable life is considered a security because of its investment risk. If you’d like to learn more about the pros and cons of different insurance policies, call us or visit our website today.
79. Why Invest in Bonds?
People buy bonds for three basic reasons: safety, income and diversification of their portfolio. [Safety] Bonds are generally considered to be safe investments, and buyers expect to get their principal back intact. But all bonds carry some risk, with the exception of government Treasury bonds, which are considered default risk free. The investment risk depends on the financial strength of the issuer and current market conditions. [Income] Due to the steady income that comes from a bond’s interest payments, they’re called fixed-income securities. The income is set at time of issue and remains the same, which makes them good investments for planning and budgeting. [Diversification] Purchasing bonds is also a good way to balance out the cash segment of a portfolio. And interest rates can be higher than money-market funds or CDs, making them attractive to investors. Just like with stocks, you don’t have to purchase individual bonds, but can buy a variety through an index or exchange-traded fund, limiting your risk and increasing your diversification. For more information on the role bonds play in a diversified portfolio, visit our website or give us a call today.
80. What to Look for in Long-term Care Insurance
Thousands of Baby Boomers are retiring each day, and many are wondering about the possibility of having to pay for expensive long term care. Long term care insurance was created to cover the costs of skilled nursing, assisted living and other types of care as you age. Long term care policies, are expensive and should be considered carefully. The expense is determined by some of the features you choose such as: Inflation protection. One of the main reasons to buy long term care insurance is to protect against rising prices. Inflation riders can be automatic, and are usually 5 percent annually, which is the most expensive. They can also be periodic, which means they’re set at increments of every couple of years. Another factor that determines the cost of long term care insurance is the elimination period – most policies require you to pay for yourself for the first 20 to 100 days of care. The shorter the period, the higher the premium. Medicare pays for up to 100 days of skilled care following a hospital stay, so check to make sure the policy day count includes the days when Medicare pays. Long term care insurance pricing varies with the Level of care provided. The three levels of care, are skilled care, or fulltime nursing care, which is the most expensive; Then there’s intermediate care, which is regular skilled care but not full-time; and lastly is custodial care, or assistance with daily living by non-medical personnel. This is the least expensive type of care. There are many other features to consider when shopping for long term care insurance. Give us a call today or stop by our website to learn more.