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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Financial Stress and What You can do About It

About half of the participants in a recent survey described financial security as not having to worry about day-to-day expenses.1 Unfortunately, the study revealed that 85 percent of Americans suffer from anxiety over their financial situation, especially how they would pay for an emergency expense. Sixty-seven percent believe financial stress affects their health, 61 percent admit it impacts their home life and more than half say it affects their social life.2

Another survey found that half of respondents were living paycheck to paycheck.3 It didn’t matter how much they earned; they all experienced relatively the same degree of financial stress. Even people earning more than $100,000 said they had a hard time putting money away for the future.4

Consider the following tips to help mitigate financial anxiety:

  • Create a budget to help keep track of incoming funds and outgoing expenses.
  • Establish a list of financial priorities for your discretionary income.
  • Develop a three-to-six month budget plan that includes larger, intermittent bills throughout the year, such as car and homeowner insurance and property taxes. Plug these line items into your master budget so you’ll know to apply discretionary income to those bills.
  • Stop ongoing expenses that you don’t use, such as a gym membership or subscriptions.
  • If you’re paying down revolving debt, consider ending your use of credit cards altogether.
  • Set specific financial goals, such as how much money you want to have saved by retirement. Then regularly save a fixed amount toward that goal.
  • Downsize your home or car for lower payments, insurance, taxes and maintenance bills.

A lot of financial stress can be alleviated by creating a strategy; simply taking proactive control of a situation can be very empowering. Once you’ve tasted relief, explore ways to create that sense of release more often. Physical exercise, such as walking, swimming or biking regularly can help.

Also consider taking classes where you engage in social activity with new people, such as yoga, tai chi, pottery or painting. While you don’t want to spend a lot of money on a new hobby, social interaction that enriches your life can do wonders for stress.

You’ll come to appreciate that some of the finer things in life don’t necessarily cost all that much.

1 Kim Blanton. Center for Retirement Research at Boston College. July 14, 2016. “Financial Anxiety Amid Economic Growth.” http://squaredawayblog.bc.edu/squared-away/financial-anxiety-amid-economic-growth/. Accessed Feb. 8, 2017.

2 Ibid.

3 Kim Blanton. Center for Retirement Research at Boston College. Jan. 12, 2017. “Financial Stress Rings in the New Year.”  http://squaredawayblog.bc.edu/squared-away/financial-stress-rings-in-the-new-year/. Accessed Feb. 8, 2017.

4 Ibid.

Content prepared by Kara Stefan Communications & Advisors Excel. 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.

How AI May Impact Jobs

In recent years, there has been a concentrated effort to encourage more students to pursue careers in science, technology, engineering and math industries (STEM). However, jobs in those fields could be more likely to be replaced by artificial intelligence (AI) technology than jobs emanating from a liberals arts education.1

In an article penned for The Guardian late last year, renowned theoretical physicist Stephen Hawking observed that, “the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.”2

Research by Citibank concluded that 47 percent of U.S. jobs are at risk of automation, 35 percent in the United Kingdom and 77 percent in China.If you think those are just middle- and working-class manufacturing jobs, think again. It is projected that 40 percent of jobs in the U.S. banking industry could be eliminated.4

Consider that some investors now rely on “robo-advisors,” which use algorithms to make automated investment recommendations. Other white collar industries that currently deploy AI include paralegal, medical, marketing, education and even technology. There are even AI “journalists” used for fact checking and writing stories about sports, weather and other simple topics.5

Facebook uses an AI algorithm that identifies its worldwide database of members using facial recognition of photos, an application that offers ample potential for the law enforcement industry. And AI’s ability to assess patterns from sets of data can make it more effective than the human eye at detecting tumors in medical imaging.6

Companies like Google and Microsoft are investing in AI to develop computers that will be able to automate office work like preparing sales reports with just a verbal request.However, not all jobs of the future can or will be replaced with AI. In fact, for the time being, the technology is largely used to increase productivity by making some jobs easier.

1 Larry Alton. “What Will Happen When AI Starts Replacing White Collar Jobs?” Forbes. May 25, 2016. Web; http://www.forbes.com/sites/larryalton/2016/05/25/what-will-happen-when-ai-starts-replacing-white-collar-jobs/print/. Accessed Feb. 10, 2017.

2 Stephen Hawking. “This is the most dangerous time for our planet.” The Guardian. Dec. 1, 2016. Web; https://www.theguardian.com/commentisfree/2016/dec/01/stephen-hawking-dangerous-time-planet-inequality. Accessed Feb. 10, 2017.

3 Oscar Williams-Grut. “Robots will steal your job: How AI could increase unemployment and inequality.” Business Insider. Feb. 15, 2016. Web; http://www.businessinsider.com/robots-will-steal-your-job-citi-ai-increase-unemployment-inequality-2016-2?r=UK&IR=T. Accessed Feb. 10, 2017.

4 Leena Lao. “Here’s How Artificial Intelligence Is Going to Replace Middle Class Jobs.” Fortune. Oct. 17, 2016. Web; http://fortune.com/2016/10/17/human-workforce-ai/. Accessed Feb. 10, 2017.

5 Larry Alton. Forbes. May 25, 2016. “What Will Happen When AI Starts Replacing White-Collar Jobs?” https://www.forbes.com/sites/larryalton/2016/05/25/what-will-happen-when-ai-starts-replacing-white-collar-jobs/#710d3f221639. Accessed Feb. 27, 2017.

6 The Economist. May 14, 2015. “How machine learning works.” http://www.economist.com/blogs/economist-explains/2015/05/economist-explains-14?fsrc=scn/tw/te/bl/ed/howmachinelearningworks. Accessed Feb. 10, 2017.

7 Ibid.

Content prepared by Kara Stefan Communications & Advisors Excel. 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.

Leaving More than Money – A Legacy of Giving Back

According to a 2016 study, 91 percent of high net worth households gave to charity in 2015, while 50 percent volunteered their time. The majority of high net worth donors do not have family traditions around giving (such as volunteering as a family or giving together to a charity during the holidays) nor do they involve their children, grandchildren or other younger relatives. However, among the 29 percent who did involve their family, most of them (77 percent) found the experience to be personally rewarding.1

Philanthropy is about more than money; it can be a reflection of a person’s inherent desire to promote the well-being of others. While this trait may be instinctive for some, it also can be nurtured — particularly within families. And it’s never too early to start.

To help cultivate philanthropy within your own brood, consider their interests. Young children may be drawn to taking care of animals, while teens are likely to participate in school volunteer activities to bolster their college-bound resumes. Ask the younger members of your family about these charitable-minded activities and brainstorm ways you all can become more involved.

Volunteering together can offer an opportunity to bond and strengthen familial ties in ways you may not have experienced. For example, perhaps you can take a grandchild to a local animal shelter to help out with cleaning, grooming and socializing. Maybe you can cancel Thanksgiving dinner or move it to a different date so the whole family can help serve a meal at a local homeless shelter.

Sometimes philanthropy needs to be hands-on to truly understand how donations and resources impact people’s lives. And for philanthropists who are unable to make high-volume gifts, they can learn ways to become involved with local charities by volunteering their time.

To get started, ask each member of your family to write down their charitable interests on an index card. Then identify common goals and prioritize them. Consider how each family member can make a contribution, whether through donations, fundraising, administrative and management roles, or by rolling up their sleeves for volunteer work.

As for large charitable donations, we suggest working with a financial professional who can suggest financial vehicles to help support your family’s objectives. Consider how individual family members can participate in charitable decision-making and volunteer activities, with an eye toward fostering philanthropy in subsequent generations. By engaging both children and grandchildren in the philosophy and management of your family’s charitable giving, you can establish a living, growing legacy of philanthropy. We’ll be happy to discuss options for charitable giving, including possible insurance options, and how they might affect your retirement income strategy; just give us a call.

From ALS funding to support for disaster victims, we often are struck by a cause or a need that fuels our passion. When philanthropic commitment is shared by members of a family, it can create a stronger collective impact than mere monetary support.

1 U.S. Trust; Bank of America Corporation “The 2016 U.S. Trust Study of High Net Worth Philanthropy.” http://newsroom.bankofamerica.com/files/press_kit/additional/2016_US_Trust_Study_of_High_Net_Worth_Philanthropy_-_Executive_Summary.pdf. Accessed Aug. 28, 2017.

Content prepared by Kara Stefan Communications and Advisors Excel.

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.

Strategies for Early Retirement

Many people find they have to retire earlier than planned, often for health reasons or due to layoffs, and need to figure out how to make their retirement savings last.1 That’s why it’s important to determine the base amount of income you’ll need to live during retirement; examine your expenses and determine what is a necessity and what can be cut out. Be sure to also factor in possible health care needs.

Bear in mind that one retiree might fall short of a financial goal that another would consider a windfall, so determining what you can live on is completely subjective. Many people can live on less; the question is: How much less?

Next, estimate how long you (and your spouse) might live. You can find longevity calculators online, including the Social Security Administration’s at www.ssa.gov/oact/population/longevity.html.2 Then factor in the amount you’re scheduled to receive from Social Security; you can find that out by establishing an account at www.ssa.gov/myaccount.3

Once you’ve determined your Social Security benefit, along with any pension money you’ll receive, subtract that amount from the annual income you need. This will determine how much you need to withdraw each year from personal savings, such as a 401(k). To the extent you can limit withdrawals early on, either by getting part-time work or reducing living expenses, the longer your money can last.

Here are some potential strategies to help effectively utilize the retirement assets available to you:

  1. Convert to Lifetime Income – A retiree might consider using a portion of his or her savings to buy an immediate annuity. This irrevocable purchase exchanges a lump sum for a lifetime stream of fixed income guaranteed by an insurance company.
  2. Pay off Debt – If a homeowner is paying a mortgage after retirement, he or she might consider selling the home and using the proceeds to buy a less-expensive residence outright.
  3. Share Assets – Another option is for a homeowner to rent out space to help pay the mortgage and utilities, or to provide income if the house is already paid for.
  4. Apply for Benefits – Some people who are forced to retire due to poor health may qualify for Social Security disability benefits; learn how to apply at ssa.gov/disabilityssi.4

We can help you determine your income needs in retirement and work with you to create strategies through the use of insurance products to help you work toward your long-term retirement income goals – just give us a call.

Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.

We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency.

1 Marlene Y. Satter. BenefitsPRO. Dec. 4, 2017. “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 June 22, 2017.

2 Social Security Administration. “Retirement & Survivors Benefits: Life Expectancy Calculator.” https://www.ssa.gov/oact/population/longevity.html. Accessed June 22, 2017.

3 Social Security Administration. https://www.ssa.gov/myaccount/. Accessed June 22, 2017.

4 Social Security Administration. “Disability Benefits.” https://www.ssa.gov/disabilityssi/. Accessed June 22, 2017.

Content provided by Kara Stefan Communications and Advisors Excel.

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.

Legislative Updates

With so much attention focused on the rifts among and between political parties and the news media, it may seem as if little actual legislation is making its way through our democratic process. However, while President Trump’s major initiatives – Affordable Care Act repeal, tax reform and infrastructure improvements – haven’t been enacted, Trump has signed more than 40 bills since taking office in January.1

Although the political situation may present frustration for people trying to make prudent decisions about their financial future, we remind you that finances are personal. Your financial decisions should reflect your own goals and timeline. We are happy to evaluate your retirement income strategy and make recommendations utilizing insurance products to help you work toward your objectives.

Here is an overview of some of the recent legislation Congress has passed:

  • Securing our Agriculture and Food Act (H.R. 1238) – This bill authorizes the Department of Homeland Security to protect efforts related to food, agriculture and veterinary defense from acts of terrorism and other high-consequence events that pose a risk to homeland security.3
  • Public Safety Officers’ Benefits Improvement Act of 2017 (S. 419) – This bill revises requirements for the Public Safety Officers’ Benefits program, which provides death, disability and education benefits to public safety officers who are killed or injured in the line of duty, as well as to their survivors. The bill includes provisions to expedite the payment of benefit claims.5

Content prepared by Kara Stefan Communications.

1 Jennifer Hansler. CNN. Aug. 3, 2017. “President Trump has signed 43 bills into law. Here’s what they do.” http://www.cnn.com/2017/06/29/politics/president-trump-legislation/index.html. Accessed Aug. 18, 2017.

2 GovTrack. 2017. “H.R. 3364: Countering America’s Adversaries Through Sanctions Act.” https://www.govtrack.us/congress/bills/115/hr3364. Accessed Aug. 18, 2017.

3 GovTrack. 2017. “H.R. 1238: Securing our Agriculture and Food Act.” https://www.govtrack.us/congress/bills/115/hr1238. Accessed Aug. 18, 2017.

4 GovTrack. 2017. “S. 1094: Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017.” https://www.govtrack.us/congress/bills/115/s1094. Accessed Aug. 18, 2017.

5 GovTrack. 2017. “S. 419: Public Safety Officers’ Benefits Improvement Act of 2017.” https://www.govtrack.us/congress/bills/115/s419. Accessed Aug. 18, 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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IRS News to Know

As we head into the final quarter of 2017, it’s a good idea to stay cognizant of any tax issues that may affect your finances come April 2018. Now is the time to review your investments and income distribution plans to help ensure you don’t trigger additional taxes or penalties later on.

We can help retirees create income distribution strategies that provide a reliable stream of income. As some income-generating strategies could increase your tax liability in a single year, we recommend clients also consult with an experienced tax professional to understand issues regarding their specific situation. We are happy to make a recommendation from our network of professional colleagues.

One common income distribution strategy is to transfer assets from an employer-sponsored 401(k) plan to a self-directed IRA. This move can give some individuals more investment choices. The IRS encourages eligible taxpayers to consider requesting a direct trustee-to-trustee transfer, rather than doing a rollover. However, if you do not conduct a direct trustee-to-trustee transfer, it’s important to understand the rules related to personally withdrawing money from one account and depositing it to another. The IRS allows a 60-day window to do this without penalty. If an individual misses that deadline, he may qualify for a waiver to extend the deposit window. The IRS will generally allow an extension for one or more of 11 circumstances, including the death of a family member or because the taxpayer becomes seriously ill. Furthermore, a taxpayer can use a new self-certification procedure to apply for the waiver of the 60-day period to avoid possible early distribution taxes.1

Speaking of IRAs, one income distribution strategy that early retirees may be able to take advantage of is IRS Rule 72(t). Normally, someone who retires before age 59 ½ would be subject to a 10 percent penalty on early withdrawals from a retirement plan. However, Rule 72(t) waives this penalty for individuals who make a series of “substantially equal periodic payments” for five years or until the retirement account owner reaches age 59 ½ – whichever is longer. The allowable amount is based on life expectancy and must be calculated using one of the IRS approved methods.Since every situation is different, individuals are encouraged to consult with a qualified tax professional before making any decisions.

A 2011 rule from the IRS relates to the “portability deadline.” This is the rule that allows a surviving spouse to absorb any unused portion of a deceased spouse’s estate tax exemption amount. The surviving spouse must file an estate tax return on behalf of the decedent in order to qualify for the portability rule, even if the estate is under the filing threshold and typically would not be required to file an estate tax return. A new IRS guideline grants a permanent automatic extension of the time to file an estate tax return just to claim portability, extending it from nine months to up to two years after the decedent’s death.3

Also, as a reminder, 2017 is the first tax year in which taxpayers age 65 and over are subject to the same 10 percent threshold of adjusted gross income (AGI) for deducting unreimbursed medical expenses as all other taxpayers (in previous years the threshold was 7.5 percent for those 65 and over). Eligible medical and dental expenses must be over 10 percent of the taxpayer’s 2017 AGI in order to claim the deduction.4

Content prepared by Kara Stefan Communications.

1 IRS. April 19, 2017. “2016 Tax Changes.” https://www.irs.gov/newsroom/2016-tax-changes. Accessed Aug. 14, 2017.

Investopedia. 2017. “Rule 72(t).” http://www.investopedia.com/terms/r/rule72t.asp. Accessed Aug. 18, 2017.

3 Michael Kitces. Nerd’s Eye View. June 28, 2017. “IRS Extends Portability Deadline (Retroactively) Under Rev. Proc. 2017-34.” https://www.kitces.com/blog/rev-proc-2017-34-automatic-extension-deadline-form-706-portability-dsue-amount/?utm_source=FeedburnerRSS&utm_medium=feed&utm_campaign=Feed%3A+KitcesNerdsEyeView+%28kitces.com+%7C+Nerd%27s+Eye+View%29. Accessed Aug. 18, 2017.

4 IRS. Dec. 15, 2016. “Questions and Answers: Changes to the Itemized Deduction for 2016 Medical Expenses.” https://www.irs.gov/individuals/questions-and-answers-changes-to-the-itemized-deduction-for-medical-expenses. Accessed Aug. 14, 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.

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.  Any references to reliable income generally refer to fixed insurance products, never securities or investment products.  Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

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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Behave Yourself 

“Overconfidence is a very serious problem. If you don’t think it affects you, that’s probably because you’re overconfident.”1

That’s a quote from Carl Richards,  a financial advisor, author, speaker, columnist and New York Times sketch artist who is well known for capturing the ethos of behavioral finance in simple words and pictures.

The study of behavioral economics and behavioral finance has come a long way in helping us understand how society’s collective actions can impact the investment markets and why, on an individual basis, we make the financial decisions we do.2

This knowledge in turn can help us control the impulsive decisions that may be costly and also lead to more purposeful actions that may improve our individual financial situation. A new study from the Deloitte Center for Financial Services defines 10 different behavioral biases that are common among investors. Three of them are:3

  • Passive decision making, or thinking that the easiest path is the best one
  • Loss aversion, when we prefer to avoid losing money over acquiring gains
  • Overconfidence; thinking that because you believe in an idea, it’s going to work

The thing about human nature is that we are all prone to impulses. If we don’t control them, our financial strategy may be affected — and possibly, our financial future. That’s one reason why working with a financial advisor is so important.

Not only can we help you create a financial strategy designed for your specific situation, but we can also help you stay on track to pursue your financial goals. So if you’re feeling an impulse to make a change, contact us first. We can help you differentiate between behavioral impulses and sound financial decision making.

Another interesting aspect of behavioral finance can be observed in our children. Much like other personality traits, they seem to develop tendencies either to buy or have an indifference to money at an early age. You may have witnessed this among your own children — raised in the same household with the same values — but they have completely different approaches to spending money.

While some of these instincts are inherent, we should make it a priority to teach our children and grandchildren sound financial principles. Not just when they’re young, but throughout their lifetime.4 Sharing stories of your own successes and bad money decisions can help shape their behavior. Because, as behavioral finance demonstrates, we never stop having perfectly natural human impulses. But our awareness, and our responses to them, may make  a difference.

Content prepared by Kara Stefan Communications.

Nocturne Capital. Sept. 6, 2016. “14 Great Behavioral Finance Quotes.” http://www.nocturnecapital.com/blog/2016/3/31/15-great-behavioral-finance-quotes. Accessed Sept. 23, 2016.
2 Michelle M. Waymire. Nasdaq.com. Aug. 15, 2016. “A Fly-By History of Behavioral Finance.” http://m.nasdaq.com/article/a-fly-by-history-of-behavioral-finance-cm665269. Accessed Sept. 23, 2016.
3 Michelle Canaan and Jaykumar Shah. Deloitte. June 1, 2016. “To save or not to save for retirement, that is the question: Is behavioral economics the answer?” https://quicklookblog.com/2016/06/01/to-save-or-not-to-save-for-retirement-that-is-the-question-is-behavioral-economics-the-answer/?linkId=27837898. Accessed Sept. 23, 2016.
4 M.P. Dunleavey. Time. Sept. 22, 2016. “My Kid Loves to Spend. Here’s How I’m Dealing With It.” http://time.com/money/4504314/children-money-behavioral-economics/. Accessed Sept. 23, 2016.

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 complete 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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Retirement Matters 

If you’re wondering how much of a Social Security payout you may receive, one number to keep in mind is 35.

Your benefit is based on your 35 highest years of earnings. If you work less than 35 years, the calculation uses zero for your annual income in the years you’re short. Here is an article that provides a description of how Social Security benefits are calculated.1

Social Security benefits were established during the Great Depression to help ensure Americans would not retire in poverty.2 However, they’re not meant to be the “end-all” retirement income plan. If you haven’t taken a good, hard look at all of the savings and assets that you’ve acquired to create a financial strategy for retirement, that’s where we can help. We can help identify potential retirement income gaps and create a financial strategy using a variety of investment and insurance products to help you pursue your financial goals.

It’s also important to assess your current financial strategy and determine what assets to draw from first, particularly in light of their tax status during retirement and the option to delay taking Social Security to potentially optimize your benefit. You should talk to a financial advisor and tax advisor about how to create a tax-efficient retirement income withdrawal strategy.

A common mistake in retirement planning is underestimating your life expectancy — maybe based on your parents’ or grandparents’ age — and not saving as much as you need. However, it’s more likely for people to live longer than previous generations, and also have higher medical bills.3 Even if one spouse dies young, it doesn’t mean the other won’t live late into their 90s.

Women who took time out of the workforce to care for dependents can be particularly vulnerable during retirement. One recent study found that, in a 10-year break early in their career, the shortage of contributions to Social Security and a retirement plan could result in a loss of up to $1.3 million in retirement savings.4

You also should consider the impact of inflation throughout retirement. Even though the inflation rate has been low in recent years, it can still make an impact over the long term. For example, an average 2 percent inflation rate over a 20-year timeframe can reduce the buying power of a dollar to just 67 cents.5

Also investigate the investment fees associated with your retirement account, as they can have a tremendous impact. A recent analysis revealed that many teachers who invested in 403(b) retirement plans could have account balances 20 to 50 percent higher had they invested in lower-cost holdings over their savings period.6

The same issues can be found with company-sponsored 401(k) plans. A plan that offers funds from only one fund family may not give you enough choices. It is also important to understand the fees you are paying.7

Our firm is not affiliated with or endorsed by the Social Security Administration or any governmental agency and does not provide tax or legal advice.

Content prepared by Kara Stefan Communications. 

Squared-Away Blog. Center for Retirement Research at Boston College. Oct. 20, 2016. “Your Social Security: 35 Years of Work.” http://squaredawayblog.bc.edu/squared-away/your-social-security-35-years-of-work/. Accessed Oct 23, 2016.
2 Ibid.
3 Jeff Brown. U.S. News & World Report. Aug. 3, 2016. “What’s Your Plan B for Retirement?” http://money.usnews.com/investing/articles/2016-08-03/whats-your-plan-b-for-retirement. Accessed Oct. 23, 2016.
4 Financial Planning. Oct. 9, 2016. “How retired clients can deal with small COLA: Retirement Scan.” http://www.financial-planning.com/news/how-retired-clients-can-deal-with-small-cola-retirement-scan. Accessed Oct. 23, 2016.
5 Jeff Brown. U.S. News & World Report. Oct. 13, 2016. “Pros and Cons in Investing with TIPS.” http://money.usnews.com/investing/articles/2016-10-13/pros-and-cons-in-investing-with-tips. Accessed Oct. 23, 2016.
6 Tara Siegel Bernard. The New York Times. Oct. 21, 2016. “Think Your Retirement Plan Is Bad? Talk to a Teacher.” http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?_r=0. Accessed Oct. 23, 2016.
7 Jill Cornfield. Bankrate.com. Sept. 27, 2016. “Q&A: Fees and Your Retirement Plan.” http://www.bankrate.com/one-to-million/qa-fees-and-your-retirement-plan/. Accessed Oct. 23, 2016.

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 complete 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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Jobs After Age 55 

The good news is 62- to 64-year-olds experienced the largest increase in jobs between 2007 and 2014.1 The not-so-good news is that many of those jobs are not of the upscale, high-paying variety.2

New research from the Center for Retirement Research at Boston College offers insights into the type of work that older people are securing today:3

  • The jobs are high on service and low on physical labor
  • Service jobs: managers, sales supervisors, accountants, real estate sales, property management
  • Low-skilled jobs: truck drivers, janitors, nursing aides, child care, retail, cab driver
  • Valued skillsets: dependability, outdoor work
  • Jobs that pay around 10 percent less than those of younger workers

A survey of households and individuals from the latest census found that, between 2008 and 2012, older workers (62+) with a college degree had less than a 50 percent chance of finding work, while those without a college degree had only a 35 percent chance.4

During an economic downturn, it’s not uncommon for employers to lay off employees, and many older workers end up getting more pink slips than others. One reason may be because they tend to earn more, so some workplaces may be inclined to hire younger, lower-paid employees to improve profit margins.5

While this may sound like age discrimination, lawsuits along those lines have become harder to win. In 2009, a court ruling made it more difficult for workers to sue for age discrimination. Plaintiffs must now prove that advanced age was the main reason for being let go — not just a contributing factor.6

Even aging workers who continue working at the same company will likely find their income doesn’t increase as much as it did when they were younger. A 2015 Federal Reserve study found that, from ages 45 to 55, wages decrease by 9 percent; they then drop another 9 percent from ages 55 to 65.7

The job situation may be more challenging for women, in part because they tend to live longer than their husbands and are therefore more likely to spend some part of their retirement living on one income. According to U.S. Labor Department projections, about one in seven women work past age 65, and within eight years that number will rise to nearly one in five.8

Working longer isn’t all bad, from a financial or social standpoint. It enables people to save longer, give their retirement assets more opportunity to accumulate, decreases how long they’ll have to live on their retirement savings and enables them to save money via employer-based health insurance.9 Plus, work provides cognitive and social engagement, which for many is a lot more fun than sitting at home or even traveling alone.

Content prepared by Kara Stefan Communications. 

Quoctrung Bui. The New York Times. Aug. 18, 2016. “More Older People Are Finding Work, but What Kind?” http://www.nytimes.com/2016/08/18/upshot/as-more-older-people-seek-work-they-are-put-into-old-person-jobs.html?_r=0. Accessed Sept. 19, 2016.
Ibid.
3 Ibid.
4 Ibid.
Bob Sullivan. CNBC. July 7, 2016. “For older workers, getting a new job is a crapshoot.” http://www.cnbc.com/2016/07/07/for-older-workers-getting-a-new-job-is-a-crapshoot.html. Accessed Sept. 19, 2016.
6 Ibid.
7 Teresa Ghilarducci. PBS. Jan. 14, 2016. “Why women over 50 can’t find jobs.” http://www.pbs.org/newshour/making-sense/women-over-50-face-cant-find-jobs/. Accessed Sept. 19, 2016.
8 Nick Timiraos. The Wall Street Journal. Feb. 22, 2016. “How Older Women Are Reshaping U.S. Job Market.” http://www.wsj.com/articles/older-women-reshape-u-s-job-market-1456192536. Accessed Sept. 19, 2016.
9 Kerry Hannon. Forbes. July 3, 2016. “5 Tips To Help Women Work Longer.” http://www.forbes.com/sites/nextavenue/2016/07/03/5-tips-to-help-women-work-longer/#74c7bf943156. Accessed Sept. 19, 2016.

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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