Assessing Risk

It is common to have a very traditional interpretation when we think of investment risk, such as the belief that stocks are seen as a risky investment, and bonds less so. But many issues have come to light in the past decade that cause us to think about risk differently. For example, there’s the risk of outliving your retirement savings, which is often cited as one of the primary concerns of today’s retirees.1

And that’s just today’s retirees. If you’re still in saving mode, your retirement could be even longer than today’s average retirement.2 Given this potential reality, it may be time for all of us to re-evaluate how we assess risk.

As financial advisors, we spend countless hours helping people develop a financial strategy for the future. That means we continuously research and discuss risk factors, and we understand how to apply them to each individual’s situation. Please contact us if you’d like help assessing what risk factors you need to consider in regard to your long-term financial goals.

Some people are naturally risk averse, and others are enthusiastic risk-takers. Most fall somewhere in between, with attitudes toward risk changing, depending on where they are in in their lives. It’s not uncommon for individuals to take more risks in their younger years, when they have more time to rebound from market setbacks, and then take a more conservative approach as they near retirement.3

If we pursue a strict risk/reward investment strategy, we can still come up short in meeting retirement goals. For example, say you are extremely risk-averse, so you invest all of your money in 10-year Treasury notes in order to generate around $56,500, which is the average annual household income. These securities, which are considered low risk because they are backed by the U.S. government, were paying out around 2.25 percent in October, so you would need to have $2.26 million invested to earn that much – even more if you factor in long-term inflation.4 In this particular scenario, we might say that such a level of risk-aversion is a luxury many of us cannot afford.

Let’s look at another type of risk. As a general rule of thumb, risk-averse U.S. investors are more comfortable investing in domestic stocks versus those in other countries. This year, that’s working out pretty well, when you consider that the S&P 500 boasted a 14.86 percent year-to-date return as of Nov. 2, 2017.5 However, a lot of countries are doing well these days, so diversifying to include foreign stocks could help improve a portfolio’s overall return while adding the risk-mitigation factor of broader diversification. To put this in perspective, consider that the MSCI World ex USA Index has yielded 15.51 percent and the MSCI Emerging Markets Index is at 25.08 percent for the year as of Sept. 27, 2017.6

It’s also important to evaluate different kinds of risk beyond that associated with individual holdings. There’s the potential risk of not keeping pace with long-term inflation’s impact on the purchasing power of our savings. There’s what’s called “sequence of returns” risk, which means your average annual return over a long timeline may be good, but if you experience declines during the beginning of your retirement years, the risk of loss is much higher.7

There’s also the risk of having significant health problems and needing long-term care. Some people experience this while others don’t, but there’s no way to be sure which camp we’ll fall into – so that’s a potential risk.

While many retirees may believe that their greatest risk is not accumulating a certain amount of money by the time they retire, we believe their goal should be to create a financial strategy that reflects their needs and objectives instead of chasing an arbitrary monetary amount.

Content prepared by Kara Stefan Communications.

1 Catey Hill. MarketWatch. July 21, 2016. “Older People Fear This More Than Death.” http://www.marketwatch.com/story/older-people-fear-this-more-than-death-2016-07-18. Accessed Oct. 24, 2017.

2 Jeff Stimpson. Forbes. Sept. 5, 2017. “How to Balance Investment Risk and Reward in Retirement” https://www.forbes.com/sites/nextavenue/2017/09/05/how-to-balance-investment-risk-and-reward-in-retirement/#629608b96ec4. Accessed Sept. 28, 2017.

3 Walter Updegrave. CNN Money. June 21, 2017. “How much investing risk should you take in retirement? http://money.cnn.com/2017/06/21/pf/retirement-investing-risk/index.html. Accessed Oct. 24, 2017.

4 Bruce McCain. Forbes. Sept. 20, 2017. “Seeking Financial Security When Life Changes Strike.” https://www.forbes.com/sites/brucemccain/2017/09/20/seeking-financial-security-when-life-changes-strike/#589a300c2f0a. Accessed Sept. 28, 2017.

5 CNN Money. Oct. 24, 2017. “S&P 500 Index.” http://money.cnn.com/data/markets/sandp/. Accessed Nov. 2, 2017.

6 eTrade. Sept. 28, 2017. “International calling.” https://us.etrade.com/knowledge/markets-news/commentary-and-insights/international-calling?ch_id=S&s_id=Twitter&c_id=ESOC. Accessed Sept. 28, 2017.

7 Dana Anspach. The Balance. Aug. 14, 2017. “Learn How Sequence Risk Impacts Your Retirement Money.” https://www.thebalance.com/how-sequence-risk-affects-your-retirement-money-2388672. Accessed Oct. 24, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Tips for Aches and Pains

As we grow older, many of us get wiser. We may become more comfortable in our own skin. We may get better at our jobs, have a more reliable income and begin to collect assets. We can gain a better appreciation of what’s important in life.

We also can lose things. Some of us lose a degree of innocence and idealism. Some miss their doggedness and fearlessness – while others may find they no longer have the thick hair of their younger years.

We also may have gains and experience losses in our finances. We learn that what goes up generally does come down, but then it can go up again. We develop financial strategies designed to help us weather economic ups and downs. If your life learnings summon the need to protect a portion of your retirement assets and help insure yourself against the risk of financial loss, give us a call. As an independent financial services firm, we help people create retirement strategies using a variety of insurance products, including annuities, to custom suit their needs and objectives.

We also may experience more physical aches and pains as we age. But there are coping mechanisms for these things, too.

For example, a lot of people these days are suffering from pain caused by our modern obsession with gadgets. We are hunched over computer keyboards and smartphones, putting strain on the head and neck. Experts say it helps to take lots of breaks, get outdoors, and do hand and neck stretches. Experience tells us that moderation in all things is key; this is also true for gadgetry.1

Some pain may be controlled through alternative methods. The National Center for Complementary and Integrative Health, a division of the National Institutes of Health, reports there is growing evidence that acupuncture, hypnosis, massage, spinal manipulation and yoga may help manage some chronic conditions. Be sure to check with your health care provider before trying any of these methods, however, to make sure they won’t put your health or safety at risk.2

And then there are the effects of emotional pain. In recent months, many people have lost their homes, family and friends to hurricane winds, flooding, fire and earthquakes. It’s been a tough time even for those fortunate enough to survive. Some of the tactics recommended to help cope with this type of pain include committing to a routine to help get your life back on track, unplugging from news sources so you can get out of the disaster frame of mind for a while and adjusting expectations going forward.3

We may not always be able to recover the things we lose, but we can find comfort in recognizing and appreciating what we still have.

Content prepared by Kara Stefan Communications.

1 The Daily Star. Sept. 2, 2017. “Is a modern lifestyle giving you aches and pains? 5 expert tips for healthier pain management.” http://www.thedailystar.net/health/5-expert-tips-healthier-pain-management-backpain-1457293. Accessed Sept. 28, 2017.

2 National Center for Complementary and Integrative Health. September 2016. “Chronic Pain: In Depth.” https://nccih.nih.gov/health/pain/chronic.htm. Accessed Oct. 16, 2017.

3 Paige Smith. Huffington Post. Sept. 20, 2017. “7 Tips for How to Cope If You’re Rebuilding After a Natural Disaster.” http://www.huffingtonpost.com/entry/cope-rebuilding-natural-disaster_us_59c2a020e4b0186c220775c6. Accessed Sept. 28, 2017.

Guarantees and protections provided by insurance products including annuities are backed by the financial strength and claims-paying ability of the issuing insurer.

This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Investing for the Long Term

What does the phrase “long term” mean to you? For children, long term can mean waiting for Christmas or summer vacation that feels like a million years away. For young adults, long term may reference how long it takes to pay off student loans. As we get older, we begin to understand that long term can be a really long time – even decades. We may wonder where the years went. Suddenly we’re in our 50s, 60s, 70s or older. Long term tends to be a subjective phrase depending on what stage you have reached in life and what your goals are.

When it comes to investing, its meaning is only marginally clearer. In other words, if we’re encouraged to invest for the long term, how long is that – 10 years, 20, 30? It largely depends on what your financial goals are – a house, college tuition for the kids, retirement and so on. We take the time to help clients define their financial goals and then create strategies using a variety of investment and insurance products to custom suit their needs and objectives. Give us a call so we can work with you to help you pursue your long-term goals.

It’s worth noting that even an experienced investor can’t say for sure whether they’ve got the right mix of investments for the long term. Take, for example, Jack Bogle, the founder of The Vanguard Group. He recently responded to a question he received from a young investor concerned about how potential catastrophes would impact his portfolio. Bogle replied by sharing his own portfolio mix (50/50 indexed stocks and short/intermediate bond indexes) but said that half the time he worries that he has too much in equities, and the other half that he doesn’t have enough. “We’re all just human beings operating in a fog of ignorance and relying on our common sense to establish our asset allocation,” he wrote to the investor. 1

The S&P 500 has nearly quadrupled in annualized returns since its low in 2009.2 Several prominent market analysts and investment firms suggest this means it’s about time for a market downturn.3 The question is, if you’re a long-term investor, do you sell in anticipation of a correction? After all, if the point is to buy low and sell high, it makes sense to take gains while prices are at their highest before they begin to drop. Or does it?

That’s not what long-term investing is about. The reason returns over 30 years tend to outperform those from, say, five years, is that time is what typically smooths out those periods of volatility. If we continue investing automatically, we may end up buying during those periods of price drops and we can potentially make stronger gains as prices rise again.4

If we base our investment decisions on when the market will take a turn for the worse, we could end up missing out on the future gains that could have been made. Long-term investing may involve patience, unlike children who anxiously await the holidays.

Investing involves risk, including the potential loss of principal.  No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice.

Content prepared by Kara Stefan Communications.

1 Andy Clarke. Vanguard Blog for Advisors. July 12, 2017. “Stocks and the meaning of “long term.” https://vanguardblog.com/2017/07/12/stocks-and-the-meaning-of-long-term/. Accessed Oct. 12, 2017.
2 Joe Ciolli. Business Insider. Sept. 15, 2017. “An investing legend who’s nailed the bull market at every turn sees no end in sight for the 269% rally.” http://www.businessinsider.com/laszlo-birinyi-interview-investing-legend-bull-market-sage-2017-9. Accessed Sept. 19, 2017.
3 Paul J. Lim. Money. Sept. 19, 2017. “ ‘Unnerved’: These 5 Big Wall Street Players Are Predicting a Downturn.” http://time.com/money/4943479/wall-street-prediction-stock-market-downturn/. Accessed Sept. 19, 2017.
4 Maya Kachroo-Levine. Forbes. Sept. 18, 2017. “Should You Invest As Usual When Stocks Are This High?” https://www.forbes.com/sites/mayakachroolevine/2017/09/18/should-you-invest-as-usual-when-stocks-are-this-high/print/. Accessed Sept. 19, 2017.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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How to Help Avoid Fraud and Scams

The recent security breach at credit rating service Equifax brings home the reminder that each of us must be ever-vigilant in protecting our private information.1 It can be easy to become lackadaisical. We expect companies with which we conduct financial transactions to keep our data secure.

Unfortunately, hackers seem to be advancing their skills at a faster rate than large corporations can keep up. Moreover, the tools available to consumers to help protect their data – including credit monitoring, identity monitoring, identity restoration and identity theft insurance – are more reactive than proactive.2

One of the newer recommendations, however, is to freeze your credit report at each of the three national credit agencies – Equifax, TransUnion and Experian. This action stops a credit agency from releasing your information to a third-party request without your permission, eliminating the prospect of someone using your information to open an account without your knowledge.3

While some transactions may leave us at the mercy of third-party security systems, we can still be cautious about how we seek information and who we obtain it from. When it comes to your retirement savings and insurance, you should work with financial professionals you trust. They should be thoroughly vetted for credentials and experience. Also, don’t feel compelled to give out personal financial information at your first meet and greet.

Unfortunately, one demographic that seems to be vulnerable to fraudsters is the elderly. One report estimated that up to $36.5 billion is scammed each year from older Americans.4

Some of the financial scams that target the elderly include fraudulent calls requesting bank or investment account information, mail or email solicitations that appear to be bills for a product or service that wasn’t provided, or overcharging for a service act that was provided. Older adults who are forgetful or unfamiliar with the ways services are charged today may assume they should give out the information or money requested – not realizing that the fault lies with the perpetrator.5 It’s generally a good idea to have a trusted family member or friend review the request before responding.

Above all, remain vigilant when someone asks for money or personal information.

Content prepared by Kara Stefan Communications.

1 NPR. Sept. 8, 2017. “Credit Reporting Agency Equifax Reveals Massive Hack.” http://www.npr.org/2017/09/08/549373796/credit-reporting-agency-equifax-reveals-massive-hack. Accessed Sept. 19, 2017.
2 WatchBlog. Government Accountability Office. April 11, 2017. “How Useful Are Identity Theft Services?” https://blog.gao.gov/2017/04/11/how-useful-are-identity-theft-services/. Accessed Sept. 19, 2017.
3 Adam Shell. USA Today. Sept. 11, 2017. “How to defend yourself against identity theft after the Equifax data breach.” https://www.usatoday.com/story/money/2017/09/11/how-defend-yourseafter-equifax-data-breach-credit-report-freeze-strong-defense-against-identity-thef/654065001/. Accessed Sept. 19, 2017.
4 Kelli B. Grant. CNBC. Aug. 28, 2017. “$36 billion might be a low estimate for this growing fraud.” https://www.cnbc.com/2017/08/25/elder-financial-fraud-is-36-billion-and-growing.html. Accessed Sept. 19, 2017.
5 Barbara Kate Repa. Nolo. “Elder Abuse: Financial Scams Against Seniors.” https://www.nolo.com/legal-encyclopedia/elder-abuse-financial-scams-against-29822.html. Accessed Sept. 19, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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When One Spouse Retires First

It’s easy to think of retirement and dream of a relaxed stroll into the sunset with your significant other by your side. After all, many advertisements repeat this theme with salt-and-pepper-haired couples strolling hand in hand across a beachfront.

Yet, this is not always the case. Anymore, we often see couples retire at different times – perhaps one spouse actually enjoys going to work every day while the other can’t wait to retire. Different retirement times, however, can open financial and emotional rifts for couples. What if the retired spouse enjoys travel, or wants to spend long stretches with family? Did the couple consider the financial impact of one spouse retiring versus both spouses? What if the working spouse is resentful of the time or money the retired spouse spends on activities?1

At our firm, we help with issues related to couples’ financial preparedness for retirement. If you and your spouse are looking toward retirement–either at the same time or years apart – give us a call.

With the proper planning, the financial piece of retirement doesn’t have to play into your marital dynamic. Based on your circumstances, a wide variety of solutions can help provide one or more retirement income streams while allowing an investment portfolio the opportunity to grow—possibly even throughout retirement. Many of today’s retirees hope to benefit from ongoing growth opportunities to help offset the potential long-term impact of inflation, rising health care and long-term care costs, and increasing longevity.

Now, couples with a big age gap may need a totally different set of strategies from other couples. For instance, if you have a significantly younger spouse, it may be more appropriate to invest a higher percentage of an investment portfolio in stocks than it would be for couples closer in age.2

One way the IRS helps out couples with a large age gap is with an opportunity to reduce the size of required minimum distributions (RMDs) from tax-deferred retirement plans, which are generally required to start at age 70 ½. When the account owner is at least 10 years older than their spouse, and the spouse is the named beneficiary, the older spouse can use a different factor for their RMD calculation, which can result in a lower payout. The benefit to this rule is that it gives more of the older spouse’s funds the opportunity to keep growing while the younger spouse continues to work.3This information is not intended to provide tax advice. Be sure to speak with a qualified professional about your unique situation.

Another retirement income option to consider for age-gap couples is a joint-and-survivor annuity. There are many different types of annuities to choose from, but joint-and-survivor actually refers to the type of distribution option that most annuities offer. If you purchase an annuity and choose this payout option, the annuity will continue to make payments to the surviving spouse, regardless of which spouse dies first.

A 50 percent option will continue to pay out half of the original amount to the survivor once the first annuitant dies, and a 100 percent option, while offering a lower original payout, guarantees the same amount for the life of both spouses.4This can be a suitable component of a retirement income plan for couples with a significant age gap.

Whether you and your spouse are similar ages or decades apart, and whether you plan to retire on the same day or years apart, you should be planning for the financial – and emotional – components ahead. If you’re ready to plan, we can help.

Content prepared by Kara Stefan Communications.

1 Karen DeMasters. FA Magazine. May 12, 2017. “Who’s Retiring First?” https://www.fa-mag.com/news/couples-retirement-gap-32725.html?section=3. Accessed Sept. 11, 2017.
2 Kerri Anne Renzulli. Time. June 14, 2017. “Money, Marriage and a Big Age Gap: 6 Ways to Make Sure Your Retirement is Safe.” http://time.com/money/4810932/age-difference-relationship-couples-retirement-advice/. Accessed Sept. 11, 2017.
3 IRS. 2017. “IRA Required Minimum Distribution Worksheet.” https://www.irs.gov/pub/irs-tege/jlls_rmd_worksheet.pdf. Accessed Sept. 11, 2017.
4 Zacks. 2017. “How Does a Joint and Survivor Annuity Work?” http://finance.zacks.com/joint-survivor-annuity-work-2270.html. Accessed Sept. 11, 2017.

Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs. Guarantees and protections provided by insurance products including annuities are backed by the financial strength and claims-paying ability of the issuing insurer.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Working Longer

Ah, the life questions we face. Young adults contemplate which college to attend and how that might affect their future. Women – and increasingly often, men – ponder whether to stay home and raise children, work or both. People contemplate job changes and relocations. And then, of course, a big question: When should I retire? One report observed that these days, about a third of adults ages 65 to 69 are continuing to work, and one-fifth of people 70 to 74 years old are working as well. The majority of them are working full time.1

If you get to make the decision to continue working all on your own, you are fortunate. Many people are forced to retire earlier than they’d like due to health reasons or because they are let go by their employer.2 If you can continue working, there can be many benefits, such as more time to save for retirement, employer-sponsored health insurance coverage, access to a social network, intellectual engagement and a place to go every day where you feel needed and important.

These are all good reasons to work longer. But whether you do so or not, you’re going to need a well-thought-out retirement income strategy. Using a variety of insurance products, we can help you create a strategy designed to help you to live the kind of retirement you’ve worked hard for. Contact us today to get started on your retirement income strategy.

If you are planning to work longer, consider that you don’t necessarily have to keep your current job. If you like it, that’s great. But if not, you might be able to phase into another role at your company, work in a similar position at another company or even take a completely different job in another industry. As we get older, we sometimes reflect back on what we’ve done, or didn’t do, and what we would do differently. If you’ve always been interested in another field, find out what it would take to break into it. If you’d like more time to pursue a hobby, figure out if there’s a way to turn it into a career.3

For example, if you love football, consider announcing for games at a local high school, coaching or refereeing. Apply to be an intern in a different field, write movie reviews for your local newspaper or work in a friend’s shop. While these jobs may not pay all that well, they may pay more than the retirement alternative of no outside income. By stringing together a variety of paying and volunteer gigs, you not only can supplement your retirement income but pursue passions and hobbies, and create quite a busy and engaged retirement lifestyle.

If you’d like a different job that can potentially pay substantial income, consider becoming a real estate agent. Many mature adults have the right qualities for the role – they know their community and neighborhoods, have a broad network of local contacts, have experience buying and selling their own homes, and understand the concerns and issues of new buyers. Furthermore, real estate is a relatively easy field to enter, and you have a certain degree of flexibility so you can work as much as you need for your income requirements.4

Another flexible job in which you may be able to use your previous work experience is as a freelance writer. Whether writing for your local paper or industry trade journals, writing is something you can practice on your own time to improve without extra schooling or training.

The point is, you may enjoy working longer and benefit from all of the associated advantages. However, if you don’t want to continue working in your current job, your options aren’t limited. You have knowledge and experience to rely on, which, when you think about it, is a whole lot more than you had when you started your career.

Content prepared by Kara Stefan Communications.

1 The American College of Financial Services. Aug. 2, 2017. “5 Things to Tell Clients about Working Past Retirement Age.” http://knowledge.theamericancollege.edu/blog/5-things-to-tell-clients-about-working-past-retirement-age. Accessed Sept. 11, 2017.
2 Marlene Y. Satter. BenefitsPRO. Dec. 4, 2015. “What is forcing workers to retire earlier than they planned?” http://www.benefitspro.com/2015/12/04/what-is-forcing-workers-to-retire-earlier-than-the. Accessed Sept. 29, 2017.
3 Robert Powell. USA Today. Feb. 27, 2017. “How to keep earning a paycheck in retirement.” https://www.usatoday.com/story/money/personalfinance/retirement/2017/02/27/how-keep-earning-paycheck-retirement/98266500/. Accessed Sept. 11, 2017.
4 Maryalene LaPonsie. US News & World Report. May 8, 2015. “Real Estate: The Ultimate Second Career for Seniors.” https://money.usnews.com/money/retirement/articles/2015/05/08/real-estate-the-ultimate-second-career-for-seniors. Accessed Sept. 11, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Ways to Help Increase Retirement Savings and Reduce Your Tax Liability

As we head into the homestretch of this year, two things individuals may be seeking are ways to help maximize retirement savings and minimize 2017 tax liability.

One way to help do so is by contributing as much as possible to an employer-sponsored retirement plan. Many employers match worker contributions up to a certain point, so that’s just “free” money going into the account. Plus, the more you contribute, the less taxable income you will have to claim. For 2017, the maximum contribution limit for a 401(k) plan is $18,000; $24,000 for people age 50+.1

If you’re already set up to max out your account, you might consider opening and/or contributing to an IRA. Even if you don’t get to claim a tax deduction for IRA contributions (although IRA contributions can also be made pre-tax, subject to certain limits), you can still benefit from additional retirement savings and tax-advantaged compounding. In 2017, the maximum for an IRA (Roth, Traditional or both combined) contribution is $5,500; $6,500 for people age 50+.2

Here’s a little-known benefit available only for active duty military widows: They can contribute all or part of the service member’s $400,000 life insurance death benefit, and even an additional $100,000 for a combat-related fatality, to a Roth IRA within one year of receiving the payout. Because life insurance proceeds are tax-free, this benefit allows the money to be transferred to a tax-free retirement savings account, which also benefits from tax-free growth.3

Another option for those who are already contributing large amounts to a 401(k) and/or an IRA is to consider purchasing an annuity. An annuity also enables tax-deferred growth, and there typically are no contribution limits.4There is a wide variety of immediate, fixed rate, fixed index and variable annuities from which to choose. We’d be happy to evaluate your financial situation and recommend  if an annuity may suit your needs and objectives.

One more tax-related bit we ran across: If you’re considering relocating during retirement to a low/no tax state, or even just wonder where your state gets its tax revenues, check out this breakdown compiled by Pew Charitable Trusts.5

Content prepared by Kara Stefan Communications

1 Brighthouse Financial. July 21, 2017. “5 Tips for Tax-Smart Investing.” https://www.brighthousefinancial.com/education/tax-smart-strategies/tax-smart-investing-strategies. Accessed Sept. 4, 2017.
Ibid.
3 Jeff Benjamin. Investment News. June 26, 2017. “Military benefit allows widows to put $500K into Roth IRA at once.” http://www.investmentnews.com/article/20170626/FREE/170629938/military-benefit-allows-widows-to-put-500k-into-roth-ira-at-once. Accessed Sept. 4, 2017.
4 CNN. 2017. “Ultimate guide to retirement.” http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index4.htm. Accessed Sept. 4, 2017.
5 Mary Beth Quirk. Consumerist. July 5, 2017. “Should You Move? See How Your State Gets Its Tax Money.” https://consumerist.com/2017/07/05/should-you-move-see-how-your-state-gets-its-tax-money/. Accessed Sept. 4, 2017.

The content provided in this blog is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.

Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. Investing involves risk, including the potential loss of principal.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Economic Growth Prospects for the Future

Are life-changing innovations a thing of the past in the United States? While today’s technology seems to advance in leaps and bounds, one economist believes it won’t change the fabric of the average American’s life the way inventions like electricity, indoor plumbing and the elevator did in the 20th century.1

Yes, the internet is an amazing resource, and smartphones are nearly ubiquitous, but in terms of economic growth and productivity, they have not contributed as much as you might expect. Social media and infinite sources of information actually may serve to reduce our productivity both at home and at work.2

Nearly everyone can think of ways innovations have increased productivity, whether it’s looking up information online rather than consulting the library or using modern kitchen appliances that make cooking prep and cleanup much easier. However, this increased technology and efficiency may not translate to any improvement in one’s financial situation. While technology and online tools can allow you to better monitor your finances, please feel free to contact us for help in assessing your current retirement income strategy. As an independent financial services firm, we help people create retirement strategies using a variety of insurance products to custom suit their needs and objectives.

Today, two of the fastest-growing industries in the U.S. are construction and computer systems design.3 While both of these disciplines certainly have the capacity to improve people’s lives and productivity, they are not likely to present the quantum leap of, say, refrigeration.

One industry poised for rapid growth is satellite manufacturing. While costly in its upstart, prices are likely to align with greater demand for navigation, transportation management, disaster management, military intelligence and telecommunication applications.4

Some say the advancement of automation will replace jobs, but proponents are quick to point out that automation can help the American workforce become more productive. Amazon is a good example of a company that has embraced automation yet continues to offer more new jobs.5

What’s interesting is that while we measure economic growth on a national scale, contributions are not balanced. Certain regions, states and metropolitan areas contribute more substantial gains to the U.S. growth rate than others. For example, the labor force in Massachusetts is currently growing at the fastest rate in the country, having added 300,000 more jobs in the past 10 years. This is primarily because the state is home to a variety of strong and growing industries such as health care, financial services, high-tech manufacturing and higher education.6

And while controversial in its mix of documented and undocumented workers, the Latino population is considered a major contributor to U.S. GDP. Between 2010 and 2015, the Latino workforce increased by about 2.5 million while non-Latino workers shrank by about 4,000. This may be explained in part by the willingness of this demographic to pursue a higher education. Latino college graduates grew by 40.6 percent in that same timeframe, compared to 13.6 percent for non-Latinos.7 Economists tend to agree that the better educated the workforce, the higher a country’s economic growth prospects.

Content prepared by Kara Stefan Communications

1 Knowledge@Wharton. Feb. 3, 2016. “Are America’s Best Years of Innovation Over?” http://knowledge.wharton.upenn.edu/article/dazzling-yet-disappointing-why-u-s-growth-productivity-will-underperform-the-past/. Accessed Sept. 4, 2017.
2 Ibid
3 Mary Ellen Biery. Forbes. April 9, 2017. “The 10 Fastest-Growing Industries in The U.S.” https://www.forbes.com/sites/sageworks/2017/04/09/the-10-fastest-growing-industries-in-the-u-s/#56fdb5471ef2. Accessed Sept. 4, 2017.
4 Business Insider. Sept. 4, 2017. “Satellite Bus Market Worth $13.64 Billion USD by 2022.” http://markets.businessinsider.com/news/stocks/Satellite-Bus-Market-Worth-13-64-Billion-USD-by-2022-1002306432. Accessed Sept. 4, 2017.
5 Steve Cousins. TechCrunch. Sept. 4, 2017. “Can robots help the U.S. get its economic mojo back?” https://techcrunch.com/2017/09/04/can-robots-help-the-u-s-get-its-economic-mojo-back/. Accessed Sept. 4, 2017.
6 Shira Schoenberg. MassLive.com. Sept. 4, 2017. “Study: Massachusetts has fastest growing labor force in US.” http://www.masslive.com/politics/index.ssf/2017/09/study_massachusetts_has_fastes.html. Accessed Sept. 4, 2017.
7 Mark Bloomfield. The Hill. Aug. 14, 2017. “Look to Latinos to drive US economic growth.” http://thehill.com/blogs/pundits-blog/economy-budget/346464-latinos-could-lead-us-out-of-economic-malaise. Accessed Sept. 4, 2017. 

This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Goals-Based Investing

There’s a difference between monitoring an investment and checking its performance on a daily basis. Rather than being concerned about short-term volatility in the market, consider the future purpose or goal of what you want your money to pay for. This is the fundamental idea behind goals-based investing. You don’t just seek out investments that will yield a certain average annual return; you identify other factors that may matter more.1

In goals-based investing, it’s not about how much your investment earns; it’s about how much you need your investment to yield. For example, let’s say you need about $50,000 to pay for your child’s college education. You save diligently from the time he or she is 10 years old through his or her last year in college – 12 years. During that time, you save $37,000. Your investment needs to earn an additional $13,000. There are a lot of factors here that will determine your return, but the point is that your investment need not be overly aggressive to achieve the return you desire. It should reflect how much risk you’re willing to take to yield the amount you’ll need to pay for your child’s education. Not necessarily more. Preferably no less.

If the investment earns more, you can put those additional earnings in your retirement savings bucket. If it earns less, you may need to tighten the belt on your finances and use more current income to pay for expenses during those college years, or get aggressive about applying for loans and scholarships. The point is, an investment should align with a goal – including its timeline for when you’ll need the money. The timeline can help you determine how aggressively to invest. The longer you have to invest, the more risk you may be able to take.

Just as the timeline matters, so does your age. Young investors with a longer investment timeline usually can be more flexible at choosing riskier investments – as long as those risks are aligned with their goals.2

However, let’s say your last child came later in life. If you will turn 60 before he or she goes to college, you could consider saving for his or her college education via tax-deferred retirement plans. You can start tapping these funds after age 59 ½ and no longer be subject to an early withdrawal penalty, but keep in mind that distributions will be subject to income taxes at that point.

Defining each goal you want to achieve can help guide your investment strategy, which can include the type of account in which you invest, such as a tax-advantaged college savings account or a tax-deferred retirement account. Different goals may call for different types of accounts, so you may need to create an investment strategy for each individual goal and monitor several different types of investments.3

This is where we can help. We’ll work with you to define each goal, establish which type of plan is most appropriate and what types of investments suit your timeline and tolerance for market risk. Then, we’ll help monitor how well those investments stay on track as you work toward your financial goals.

When all of these factions are aligned, you can be less concerned about day-to-day fluctuations. If you think you need to save more, you might want to consider different ways you can generate additional income sources that will allow you to save and invest more.

Perhaps one of the most significant benefits to a goals-based approach is that it makes us think about what we want in life in very tangible terms. Suppose you want to retire to a coastal community. That’s your goal, and how early you get started saving and investing and at what age you’ll want your money can help determine your investment allocations. The return on that investment will ultimately decide how much house you can afford when retiring to your coastal destination. When creating your financial strategy, you should also consider the sort of lifestyle you want to provide your family and how expensive a college you want your children to attend. As with investment risk, trade-offs may need to be made in order to pursue your financial goals.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice.

Content prepared by Kara Stefan Communications.

1 Michael Finke. The American College. June 19, 2017. “The Philosophy of Goal-Based Investment Planning.” http://knowledge.theamericancollege.edu/blog/the-philosophy-of-goal-based-investment-planning. Accessed Aug. 30, 2017.
2 Amy Kemp and Dorsey Wright. NASDAQ. Aug. 3, 2017. “The Next Generation of Investors.” http://www.nasdaq.com/article/the-next-generation-of-investors-cm826808. Accessed Aug. 30, 2017.
Sunder R. Ramkumar and P. Brett Hammond. Forbes. April 10, 2017. “Goals-Based Investing: From Theory to Practice.” https://www.forbes.com/sites/pensionresearchcouncil/2017/04/10/goals-based-investing-from-theory-to-practice/#462b4018459d. Accessed Aug. 30, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Wealth and Income: Some Tax Implications

What do Michael Bloomberg, Arnold Schwarzenegger and Mitt Romney all have in common? When they held public office, each accepted only $1 in annual compensation. President Trump also has chosen to forgo his pay, donating his first-quarter salary – minus an amount for taxes – to the National Parks Service.1

Taxes were deducted from the donation due to IRS rules regarding donating income. According to the rules, if you accept income, you are generally responsible for the income taxes levied on it, regardless of the fact that you may then turn around and gift it. You may be able to claim the gift as a tax deduction, but the deduction is against the taxes owed on that income. President Obama worked around this rule by having the reward money for his Nobel Peace Prize paid out directly to charity so he bore no tax liability on those funds.2

Clearly, if you’re going to be generous with wages or assets, it takes considerable planning ahead to help minimize your tax liability. Indeed, the same goes for the federal estate tax on wealth valued at more than $5.49 million, to which one White House adviser allegedly remarked, “Only morons pay the estate tax.” In other words, those who are subject to the tax tend to deploy strategic plans to minimize or avoid it altogether.3

Perhaps proactive tax planning is one of the reasons revenues from the current 40 percent federal estate tax have been plummeting, dropping from $25 billion in 2008 to $17 billion in 2015.4 Then again, in 2008 the federal estate tax rate was higher (45 percent) and applied to a lower threshold ($2 million).5

As we move toward the end of 2017, tax reform is in focus for a couple of reasons. First, President Trump is working to make good on his campaign promise to cut taxes; that’s no small feat given the revenues needed to support ambitious infrastructure and military initiatives.

Second, as we approach year-end, it’s time to consider your income tax bill for 2017 and any strategies you can deploy to help minimize your taxable income. It’s a good idea to work with an experienced tax professional familiar with your unique needs and financial situation. Remember, when it comes to taxes, a strategic plan can make a significant difference. We can refer you to a tax professional; just give us a call.

Content prepared by Kara Stefan Communications.

1 Robert W. Wood. Forbes. April 4, 2017. “Trump Donates Presidential Pay, Reminding Us IRS Rules Apply to Everyone.” https://www.forbes.com/sites/robertwood/2017/04/04/trump-donates-presidential-pay-reminding-us-irs-rules-apply-to-everyone/#2400d9e02824. Accessed Aug. 30, 2017.
2 Ibid.
3 Robert W. Wood. Forbes. Aug. 30, 2017. “Estate Tax Repeal Is Not Just For Morons.” https://www.forbes.com/sites/robertwood/2017/08/30/estate-tax-repeal-is-not-just-for-morons/#2cc8df70701b. Accessed Aug. 30, 2017.
4 Robert Frank. CNBC. Aug. 29, 2017. “‘Only morons pay the estate tax,’ says White House’s Gary Cohn.” https://www.cnbc.com/2017/08/29/only-morons-pay-the-estate-tax-says-white-houses-gary-cohn.html. Accessed Aug. 30, 2017.
5 Julie Garber. The Balance. June 8, 2017. “Exemption From Federal Estate Taxes: 1997-2017.” https://www.thebalance.com/exemption-from-federal-estate-taxes-3505630. Accessed Aug. 30, 2017.

This information is not intended to provide tax or legal advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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