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February Newsletter: 2017 Retirement Plan Savings Changes

2017 Retirement Plan Savings Changes

Las Vegas Financial Advisor

For those people that are participating in a traditional 401(k) or government retirement plan such as a 457 or 403(b), contributions will remain the same for 2017. Employees under age 50 can save up to $18,000 in the plan, with those age 50 and older socking away an additional $6,000 catch- up contribution.

IRA’s have not seen a change in many years, with the same $5500 limit and a catch-up contribution for people 50 and older of $1000.

There are other plans that will see an increase starting in 2017. For those that benefit from a traditional pension plan, the maximum annual benefit will increase to $215,000 (up $5000).

If you’re a self- employed individual or have a company you work for that has a 401(k) similar type plan, the amount that can be contributed annually is up $1000, from $53,000 to $54,000. The type of plans that benefit from this increase are Single 401(k) and SEP IRAs.

Regardless of the plan type you participate in, check to make sure you’re contributing the maximum amount. Some plans have a feature that allows your contribution to automatically increase each year, to the maximum at some point. As your wages increase, automatic contribution increases are good way to ensure your contributions increase offsetting your taxable earnings.

If you have any questions regarding these types of retirement savings plans or would like me to review your plan, feel free to contact our new Las Vegas Financial Advisory.

Retired and Kids Are Grown? You Still May Need Life Insurance

Las Vegas Financial AdvisorWhen you were starting out your young life, acquiring assets, having children, and moving up the ‘corporate ladder’ was part of your everyday life and having life insurance made sense.  After all, protecting your family in your absence was part of your plan.  Now that you’re retired and the kids are grown and gone, do you still need life insurance?  If you can answer “yes” to the questions below, you probably do even if you’re over age 65!

Are you responsible for taking care of someone other than yourself?  If you are caring for someone else financially, such as a parent, spouse, or child, you still have a need for life insurance.

Are you still working?  If you’re still working and intend to continue working for one or more years, the loss of your income could be catastrophic to others.

Do you intend to leave assets to beneficiaries when you pass?  Not having life insurance in place can have a major impact financially if your beneficiaries have legal fees and taxes to pay on your estate.

Do you have debts?  If you have a mortgage or other payments, life insurance could be used to pay your debts if you pass away.  Your debts are not ‘forgotten’, your estate (or family) has to pay them off!

Do you have a retirement plan that stops when you die?  If you receive payments from a pension or a single life annuity, when you pass your beneficiaries receive nothing.  The income stream that you had does not pass to a spouse or heir, and if you are financially supporting them, life insurance is a must.

Do you plan to pay for your own funeral or final expenses?  As much as you may not want to think about it, death is unavoidable.  Having life insurance in place is a way to cover the final celebration of your life.  In most instances, your beneficiaries filing a death claim and receiving proceeds of a life policy takes less time than liquidating retirement assets to cover the expenses.

If you have questions as to if you still need life insurance when you’re retired, let’s have a conversation.

When An Investment Is Too Good To Be True

Las Vegas Financial AdvisorEveryday regular, trusting, hard-working people fall victim to scams involving investments.  This happens all over the world, not just in our country.  Many times, victims are associated by profession, friendship, religious affiliation, and other associations they belong to.  Why does this happen in an ‘associated group’ way?  Because scammers know that large scale success lies in getting an associated group to buy into their scam.  It is easier to ‘sell’ their scam when they can use associations and ‘name dropping’ when inviting you to participate or discuss their ‘investment’ with you.

When considering an investment, professionals working in a regulated industry never ‘name drop’ or discuss associations and individual members that they work with.  It’s not ‘legal’ to name other individuals they do business with due to Federal privacy and personal information laws.

If you hear about an investment that sounds ‘too good to be true’, it is up to you to question that investment.  If you ask questions and don’t have them answered in an understandable way, the person telling you the information may be changing what they are telling you, or are trying to make you feel you are not capable of understanding it.  They position it as a ‘complex’ investment that you’re lucky to be invited to participate in.  Investments should not be too complicated to understand, or too simple that it seems like a ‘get rich quick’ exclusive opportunity!  Investing and reaping the rewards of the investment takes time and is not something too good to be true.

Regulated investments are registered, sold, and serviced by licensed professionals who have no criminal history, no bankruptcy, have received training, and participate in continuing education.  As you hear about investments that are ‘too good to be true’, examine who is selling them, if they’re regulated, and do your ‘on-line’ research on the investment and the person you’re doing business with.

Are Your Priorities ‘Out of Sync’?

Las Vegas Financial AdvisorIt may be easy to get lost in the “black whole of stuff” and what we ‘think’ is a priority if we’re not careful.  Having a new car, an updated cell phone, things we can’t afford long term, and keeping up with others should not take precedence over taking care of YOU.  Don’t let your priorities get out of sync this year and examine what you’re doing in each of these areas:

Protect Yourself.  Aside from making good, healthy decisions for yourself, are you insured?  Do you have health insurance, life insurance, property and casualty insurance?  If you’re not insuring yourself and your assets and are spending money on going out every weekend instead of insurance, you have your priorities out of sync.  Use your health insurance and have a preventative exam this month!

Pay Yourself First.  Before you pay your bills, make sure you are saving each month for your retirement.  Over the long term, you will accumulate savings that you will need later in life.  Save now while you’re healthy enough to work and save.

Keep a Roof Over Your Head.  Pay your mortgage or rent first; bills come second.  If you have too many bills related to debt that it makes it hard to make your housing payment, assess your priorities and make a plan to get rid of them!

Learn to Say “No”.  No to spending on things you don’t need, no to choosing activities that don’t benefit you or your health.  Once you’ve learned to say ‘no’, it becomes easier to say ‘yes’ to things that benefit you long term.

Make a Plan.  It’s been said and proven that ‘those that fail to plan, fail’.  Planning can be as quick as making a list to accomplish this week, or as slow as saving money for retirement over a number of years.  Without making a plan, starting, and reassessing, you are more likely to fail and do nothing.  During your planning process, examine all of the areas listed above and see what you’re plan is lacking.

Prioritizing makes sense and is adjustable according to what is happening in your life.  Take care of your most valuable asset first (You and your family) and don’t assume that your plan is complete without examining it periodically. If I can assist you in ‘syncing your priorities’ please feel free to contact me.

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January 2017 Newsletter

When Overconfidence Hurts

Las Vegas Financial Advisor

There are times in our lives when being confident is a good thing. But there are situations where being overconfident can hurt, especially when it comes to investments. Psychologists have studied confidence, and how it relates to previous knowledge we have. During the study, they asked questions that would require a range of answers based on previous knowledge such as “how long do you think the Nile River is; 20 miles, 50 miles, or 100 miles long”? What they found was that the participants of the study were more often wrong then not! Expecting only a small percentage of incorrect answers to their study’s questions, the reverse happened where only a small percentage of participants were right in their answers! They termed this phenomenon the overconfidence effect. The overconfidence effect also applies to forecasting, such as the stock market’s performance over a year, leading one to being overconfident that their predictions will be accurate. Interestingly, the study found that people that are believed to be ‘experts’ in their field of study (or experiences) will suffer from the overconfidence effect more than the average person. They actually believe the incorrect answer is right.

When thinking about investments, being overconfident can hurt us by making us believe that we are more knowledgeable than outside sources. Other people with knowledge pertaining to investments, such as financial advisors, could help us make better decisions. The overconfident investor tends to trade too often, cost themselves more money, and sets the stage for poor performance over time by picking investments that are not aligned with their goals. They tend to believe they are outperforming in the stock market in comparison to others, which tends to be inaccurate. The study also found that overconfidence effect is more prevalent in men than in women; women tend to not overestimate their knowledge as much.

To overcome being an overconfident investor, discussing your investments with a financial advisor in Las Vegas may help. Setting goals, diversifying, and working toward your goals over time and not just in the short term can change the outcome of bad decisions being made due to being overconfident. Confidence is not a bad thing, but getting a second opinion on what is truly happening with your investments and not what you perceive to be happening is never a bad idea.

Transferring Wealth Through Estate Planning

Las Vegas Financial AdvisorTransferring Wealth has no ‘right or wrong’ way of doing it, but is best done in the way that you prefer, and you consider how it will affect your heirs. Planning to transfer assets should involve more than one professional as you develop and plan for transferring wealth. Always include an attorney, tax professional, and your financial advisor so that everyone involved can explain benefits and consequences to your heirs and your surviving spouse, if still living. No one solution works for every family. With 2016’s tax exclusion at $5.45 million per individual estate donor ($10.9 million per couple), you don’t want your giving to result in financial consequences for your heirs.

You want to regard your wealth transfer as ‘leaving a legacy for others’ which includes protecting others while you pass on your values and financial dreams for them. Some people consider transferring wealth to benefit their children and their children’s children, and if the wealth is great enough, endowments can be created to benefit many people. The complexity of the wealth transfer increases with the number of people it is being created to benefit, and the length of time you want the assets to last. Wealth transfer may become complex due to the personalities of the people it benefits, just like a family can be complex due to different personalities.

Important things to consider are how much control you want to have prior to passing, understanding issues that can arise from not equally distributing assets among family members, and if part of the estate should start to be transferred now and the remainder at death. Transferring wealth through estate planning should not be a ‘quick decision’ decided in only one appointment. Not considering all outcomes and how it will affect all heirs can be costly, as well as lead to relationship consequences.

Once you’ve created your estate plan talk to your family about it. Invite open dialog, and invite their questions while appropriately answering them. Help your family understand the reason behind your decisions, but don’t be swayed by your decision to be generous if not all members agree with decisions. Letting them know the resources for information that helped you to your plan many times eliminates concerns when family members know you consulted legal, tax, and asset professionals. You may not choose to disclose certain information regarding the wealth transfer, which is your decision. Informing family members that there is an estate plan in place many times eliminates concern regarding asset transfer.

If you have any questions regarding wealth transfer, please schedule a free meeting with my Las Vegas office to learn more about how we can help you with estate planning.

The Value of Planning

Las Vegas Financial AdvisorPlanning is valuable for many reasons and helps to ‘normalize’ things when you find yourself in the middle of an unexpected life event. A death, job loss, new family member, an inheritance, divorce, or a catastrophic event that can cause a major financial detour. How you plan will help determine how you survive and normalize after these events.

Planning can be as simple as making sure you have the right insurance coverage, from personal to property insurance. All insurance is in place to offset risks and protect other assets that you’ve worked hard to accumulate. Another step in planning is to make sure you have a will in place if something happens to you so that your loved ones know you want things taken care of.

As strange as this may sound, some people even go as far in their planning to offset risks to their financial plan if they go through divorce. Financial advisors are working with couples to plan for the life event of going through a divorce to help plan for offsetting financial risks of saving and planning for one! Not all people plan for the ‘what if I become single again’ risk and may find themselves unprepared for income and savings being decreased.

With life’s constantly changing events, you may need to reassess your goals and plans for achieving them. Are you on track for retirement if any of the above circumstances happen? Does your portfolio strategy reflect sudden life changes? In working toward your financial goals it is possible to run scenarios to see the outcome of life events and the possibility of how it may affect you. If you get detoured by a life event, or even a bad investment decision, planning (and previous planning) helps you to recover sooner to what felt ‘normal’. We all know life can be messy, and what you do now can help make the difference for what may happen later. No one can predict the future, but it helps to prepare ourselves as much as we possibly can.

Planning for all types of events is valuable. If you would like to visit regarding planning for potential risks to your retirement plan, please contact our Las Vegas office to set an appointment.

 

Money Market Reform

Las Vegas Financial AdvisorOne of the last reforms to happen after the financial crisis fallout of 2008 is Money Market Reform, implemented in October 2016. Money market funds have at times been misunderstood by investors as a ‘safe investment’ during times of financial crisis. The reality is that money market funds are traded in the same manner as other securities. There is no ‘safety net’ or ‘guarantee’ your investment in a money market will not lose value. Money Market funds took a hit during the financial crisis just like the rest of the stock market did. Reform of money markets? Here’s why:

Money Market Funds managed by the Reserve Primary Fund prior to 2008 were at a fixed $1 NAV (Net Asset Value). When the market started to drop and investors started liquidating Money Market funds because their value had dropped below the $1NAV, mass redemptions started taking place, causing a loss of more than two thirds of the value of the fund in 24 hours.

Now, eight years later the SEC (Securities and Exchange Commission) has issued new rules for the management of money market funds to help with stability and restrictions on the fund’s holdings and liquidity requirements. These money market funds now have a ‘floating’ NAV, no longer a fixed NAV.

Secondly, fund providers are now required to impose ‘liquidity fees’ in an effort to deter a liquidation run on a money market fund that is triggered when the fund’s value starts to drop. Fees can range from 1-2%. Funds can also suspend liquidation of the fund for up to ten business days in a 90 day period in order to deter mass liquidation.

Who may be affected by this new ruling? Retail investors may not see any changes since retail money markets still maintain the %1NAV, although there may be liquidation stipulations. However, investors in 401k plans will see changes as institutional funds are subject to the new rules. Most of the money market funds inside these plans will switch to US Government money markets which are not subject to the floating NAV. Those investors seeking a ‘higher return, higher risk’ money market will have to invest outside of their 401k plan as many plans will be switching their money market option to another solution, or removing money market funds completely.

If you have questions regarding your money market funds inside a retirement plan, or are looking for another alternative feel free to contact our Las Vegas office.

December 2016 Newsletter | Better Now or Better Before?

Las Vegas Financial Advisor - Richard London FinancialBetter Now or Better Before?

After the elections held last month (November 2016), many Americans are reflecting on how they ‘feel’. All indications are that the last eight years has created ‘a feeling’ in most Americans regarding their financial security and the economy as a whole. To remind you of the past, let’s take a look at what fall 2008 was like:

America was in the middle of the Recession, the US Government was announcing an anticipated shut down, the nightly news was reporting stories about company layoffs, and reports of the stock market crashing was a daily event. 2008 created a lot of stress for many people, and brought anxiety regarding a recovery from the Recession.

What did you learn from eight years ago? Has the past changed how you look at the world, your job (if still employed), how you manage your finances, and how you manage your retirement assets? Did you benefit over all from a low stock market by purchasing extra shares, or did you liquidate and are now trying to ‘catch up’ on lost assets? As we embark on the future, now is a good time to review where you are financially and make a plan to move forward. Reviewing may help protect against past mistakes reoccurring by thinking about what happened to you personally back in 2008. Many people were not prepared with emergency funds, portfolio adjustments, and a plan to wait in order to recover and readjust.

To give you a sense of where we are now, here is the latest as we consider if we are better now:

The S&P 500 Index has been above 2000 most of the second half of 2016, in comparison to 735 in February 2009. The median house hold income increased in 2015 by 5.2% to $56,516. Two thirds of Americans say they are making more income then they used to, with only 20% saying they are making less, according to the August 2016 Gallup American Satisfaction Survey.

If you feel you haven’t recovered or moved ahead financially since the Recession, consider meeting at our Las Vegas Financial Advisory to discuss your personal situation regarding debt issues, savings opportunities, and planning for your future so you feel you will be better off in the future than in the past.

In What Season Will You Retire?

Las Vegas Financial Advisor - Richard London FinancialHow the stock market is doing at the beginning of your retirement can determine if you’ll have enough money throughout retirement and can have an impact for many years. Because no one can predict the future, planning for all scenarios can help you ‘weather’ all seasons during retirement. You need to be ready for whatever comes your way.

If you retire during a ‘bull market’ you will be fortunate in that your portfolio could get a boost. Portfolios during this type of market grow and blossom just like the seasons of spring and summer produce growth in nature.

If you aren’t as fortunate and retire during a ‘bear market’, having a well thought out plan can help you manage some risk. Preparing for ‘unseasonable conditions’ can help prepare you for the possibility that your retirement savings could be damaged as you start withdrawing assets. If the market decline lasts awhile, it could make it harder to make up for lost values. Try a different approach as you prepare for ‘weathering the seasons’ of the market throughout your retirement:

Set Aside Enough Cash to cover spending for one year for all of your living expenses. Whatever your ‘number’ is, this cash amount should be what you need after fixed resources such as monthly Social Security or Pension payments.

Determine Assets that can be Easily Liquidated. This should be 2-4 years of what you would need in retirement for living expenses. For example, if you determined you need $45,000 per year (what you determined for your one year of living expenses) you would need two to four times that amount. Because we know a market downturn can last more than one year, planning for additional years of ‘bad weather’ can make you more resistant to portfolio damage.

Continue to Grow Assets. Preserving your portfolio during a bear market is key to growth over the long term. If you don’t have to deplete assets you have a greater chance of your portfolio recovering to past values, or possibly a greater value in the future.

You shouldn’t change your plan or portfolio because of an unstable market. Try to ‘weather the storm’ and be proactive about which assets should be depleted and in what order. Preparing yourself prior to retirement by having these three ideas in place will help you feel more comfortable that you can take on the risks and get to your goals no matter what the season brings. Contact our Las Vegas Financial Advisory to learn more

A Plan for Managing Your Debt in 2017

Las Vegas Financial Advisor - Richard London FinancialBeing debt free is possible for everyone, regardless of income. For those of us who do have debt, we need to learn to manage our spending and debt in order to be successful at saving. Being debt free and focused on saving can be life changing. Unfortunately in our society, ‘debt’ offers are around us daily and try to persuade us to ‘buy the lifestyle’ we want. Here is a short list to help you manage your debt in 2017 by getting started NOW!

CREDIT DEBT:

  • Order your credit report through a free reporting online option such as Free Credit Report if you haven’t reviewed your credit score and creditors tied to you in the last year. Check for any incorrect information and if you find errors, file a claim on the same website you’re using to access information.
  • Pay off the highest interest rate debt as quick as you can. Once the highest creditor is paid off, focus on additional payments going to other creditors in order of interest rates.
  • Check your account statements for errors and late payment posts. Contact them to ask for reversal of late payments if you can prove errors on the creditor’s part.
  • Use your credit to your advantage. Using credit and paying it off each month helps to build a solid credit history.
  • Shop for better interest rates for credit accounts. If you anticipate carrying debt for more than a year, consider transferring balances to a lower interest account.

PROPERTY DEBT:·

  • See if refinancing your first mortgage at a lower rate can benefit you, but do not lengthen the time of the loan. Banks make money on refinances at a lower rate when they can add years onto the loan.
  • If you have a second mortgage, determine if combining it with your first mortgage through a new loan at a lower interest rate makes sense. Again, try not to lengthen the loan duration.
  • Vehicle and recreational vehicle loans should be paid down in a similar manner as a credit card, with the highest rate note going first through increased payment.
  • Learning to manage your debt and decreasing your debt will help you enjoy what you work so hard for because it will truly be yours once it is paid off. What you ‘own’ really isn’t yours until then.

Year End Purging and Document Storage

Las Vegas Financial Advisor - Richard London FinancialAs 2016 winds down, now is a good time to organize your important documents. Start by reviewing documents you want to purge or keep, and consider where to store them. If you needed to access certain documents quickly, would you know where to find them? If that answer is ‘no’, here are a few ideas to get you started on what should be saved and ideas for storage:

Financial Statements- it is not necessary to keep each one and with on line access, statements don’t need to be ‘stored’. Access them on line when you need them and print a copy for financial meetings. Most companies keep access to on-line statements for four years. Accessing a copy beyond that may require assistance from a customer service person.

Tax Returns- If you have your returns prepared by a professional (CPA, CMA, not bookkeeper), keep the last three years. This is the common timeline for an audit to occur, or tax records used for lending purposes. Generally your tax professional will hold records for 7 years. If you have gone through bankruptcy, divorce, or a business closing keep records for 10 years.

Life Insurance Policies- Keep indefinitely. In the case of a death claim or surrendering the policy for cash purposes, the original policy will need to be sent to the insurance company.

Home Owners, Auto, and Other Liability Insurance Policies- Keep the original document and the last quarterly statement of coverage. Each time a new statement of coverage comes, securely dispose the older one.

Identification Items, Marriage Certificates, Divorce Decrees- Keep the originals always of Birth Certificates, Social Security Cards, Marriage Licenses/Certificates, and Divorce Decrees. If children are involved and custody terms are outlined in the decree, keep until the last child is 18 years of age. For property division, keep until you have been divorced for 10 years.

Storing important documents can be done in various ways. The most common is storage at home, either in a personal size safe or other type of secured container. The problem with this method is that documents may be destroyed by fire or other natural disaster. Many people choose to store important documents in a safety deposit box off premises from their home.

A quick way to look up documents or always have a copy (not the original) is to store each document on a USB flash drive. Documents can be scanned to your computer then saved on the drive to have easy access.

Mobile apps are becoming popular for storing documents. The app stores the document once a photo is taken of the document and uploaded to the app.

Regardless of your storage preference, keep your documents up to date and secured at all times and purge out documents that are not needed by shredding, burning (think outdoor fire pit), or destroying so that the information is not compromised in some way.

 

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November 2016 Newsletter

Don’t Ignore Medicare Open Enrollment

Las Vegas Financial AdvisorsEvery year those on Medicare have the opportunity to update their coverage during the open enrollment period that ranges from October 15 to December 7. This means you can change your provider for Medicare Part D, the prescription drug coverage, and for a Medicare Advantage Plan if you have or want to add this type of coverage. Why should you consider doing this?

Part D coverage- Medicare prescription drug coverage is provided by private insurers around the country. Many things can change from year-to-year. Certain drugs might not be covered or covered at a lesser reimbursement than in previous years. Your favorite drug store chain might cease to be on the plan’s list of approved providers. Or perhaps one of your prescriptions has gone from a name brand to generic, lowering the cost. Additionally, your health situation has changed and with that the prescription drugs that you require.

All of these factors plus the fact that premiums, deductibles and co-pays can also change year-to-year, are good reasons to review your Part D coverage and shop around for new coverage if needed.

Medicare Advantage plans- Medicare advantage plans generally cover Medicare Part A (hospital coverage) and Part B (medical insurance). In addition, many plans also include prescription drug coverage and may offer coverage for items typically not covered by original Medicare, such as eyeglasses and dental care. There are different types of Medicare Advantage plans that offer network options such as an HMO or a PPO. They each have different premiums, deductibles and co-pays. Additionally, the providers that are considered in-network will differ and can change from year-to-year.

Just as with Medicare Part D, all of these features, as well as your own personal situation, can evolve over time. Are your needs the same as they were when you signed up for Medicare? Does this Medicare Advantage plan still make sense? Does any Medicare Advantage plan still make sense?

During open enrollment it is relatively easy to go from traditional Medicare coverage to a Medicare Advantage plan. Should you decide to move back to traditional Medicare after more than 12 months in a Medicare Advantage plan, your ability to obtain Medigap coverage may be restricted. Medigap policies cover items not covered by traditional Medicare.

The annual open enrollment period for Medicare is an important time to review coverage and your current needs and to make adjustments. Please contact us with any questions about your coverage.

NOW Is the Time to Plan

Las Vegas Financial AdvisorsEvery year the Transamerica Center for Retirement Studies conducts studies in the US and 14 other countries regarding generational findings on retirement. The August 2016 report outlines the differences between three generations (Baby Boomers, Generation Xers, and Millennials) here in the US, and how each is dealing with, preparing for, or trying to live with their retirement savings.

Overall, the 2016 study found that people have ‘recovered’ in their feelings of being able to retire on time with enough assets to the level they indicated back during the 2007 study (Pre- Recession). What is interesting is that confidence level has plateaued ever since. Part of the confidence level plateau is related to personal savings, company retirement opportunities (people can elect to not participate), and the realization that Social Security will either not play a large part in retirement savings, or be non-existent.

Those that feel ‘more confident’ in their retirement savings (all three generations), are those that are actively planning and participating:

Baby Boomers- Born between 1946 and 1964

Are Active in annual or semi-annual financial planning meetings

Have a plan to ‘spend down’ assets

Readjust their monthly budget as needed

Keep financial and insurance information up to date with a financial advisor

Generation Xers- Born between 1965 and 1984

Participate in company retirement plan at 1 ½ times the company match

Contribute to tax deferred retirement savings

Are active in annual financial planning meetings

Have a monthly budget and work to minimize or eliminate personal debt

Invest in investments that are reserved for retirement savings

Establish savings for emergency purposes and have insurance coverages for protection

Millennials-Born between 1985 and 1997

Participate in company retirement plan to get company match

Work to eliminate debt and manage spending through budgeting

Establish savings for emergency purposes and have insurance for protection

Are active in yearly financial planning meetings

Contribute to a tax deferred retirement savings account at an amount they can afford

Regardless of your generation, having a retirement strategy will help you to prepare for, and enjoy your retirement. Contact our office to schedule a meeting to help review or develop your plan.

The Smallest 2017 Social Security Cost of Living (COLA) Increase…Ever

Las Vegas Financial Advisors2017 will mark the lowest increase in US history with most retirees seeing a monthly increase of 0.3 percent (there was no increase in 2016). This will increase the average American’s monthly payment between $2.61 and $6.53 per month. What many Americans don’t understand is that Social Security and Medicare are connected. When monthly Social Security payments rise, Medicare’s monthly rate increases. There are perimeters in place to protect those who started receiving payments years ago; their monthly Medicare cost can never be more than their Medicare payment. For retirees starting to receive payments, this cap is to remain in place as well. The rate rise is reflected in Medicare Part B.

When COLA was put in place back in 1975, it was tied directly to the price of gas and other consumer items. This formula and policy has never been changed. When gas prices are low, there is a small (or no) increase; consequently when gas prices are high Social Security COLA is adjusted, taking into account inflation. In theory tying COLA to inflation is a good idea, but when it’s tied directly to the price of gas or electronics it becomes a bit flawed. Senior Citizens tend to drive less than someone who is still working and purchase less non-essential goods, but they typically pay more in medical expenses. This formula is not tied to consumer staples, such as food and personal care items.

Not every American receives the same Social Security monthly benefit; it is directly tied to your earnings record using a calculation formula. As a result, someone the same age with the same date of birth could be receiving different benefit payments, AND paying different Medicare rates. Because of this, people with a higher lifetime earnings (and Social Security Savings) record will be paying more for Medicare Part B than their counterparts.

Financial Planning Lessons from a Life Cut Short

Las Vegas Financial AdvisorsTowards the end of the Major League Baseball season we learned of the tragic death of Miami Marlins pitcher José Fernández in a boating accident. He was just 24 and had a bright future in baseball ahead of him. He also left a young child behind. The untimely death of Fernández brings to light the need for young, successful professionals to engage in financial planning.Here are some things successful young professionals need to consider in order to protect their assets and ultimately their estate if something tragic should occur:

Life Insurance- If you are young and healthy, life insurance is very cheap. This is especially the case for term insurance. If you have dependents such as a spouse or children buying life insurance is a must. This is an inexpensive way to build an estate and to ensure that your loved one’s have financial choices in the event of your untimely death.

Disability insurance- Disability insurance is sometimes called “lifestyle” insurance. Disability policies kick in should you become disabled and unable to work. Typically, they will pay a percentage of your income, 60% is a common number.

For those who are employed, disability insurance is often a part of the employee benefits package offered by your employer. There may be both long-term and short-term coverage available. For those earning a lot or who earn a high percentage of their compensation from commissions or bonuses, check to be sure how much of this type of income is included. It might make sense to purchase private disability insurance if the coverage on the employer-offered plan is inadequate, or if you are self-employed. If you have a debilitating event and don’t have coverage, it can deplete your retirement assets early due to not being able to work.
Will and estate planning- It is critical for all of us to have a will and to do some basic estate planning. For young, successful professionals, athletes etc. this is critical. The more money you accumulate, the greater the chance that it won’t go to those to whom you intend unless you do some specific planning up front. A will is a must. If you have minor children this should include naming of a guardian in the event that both you and your spouse die. Beneficiary designations for retirement plans and insurance policies are also needed. These types of financial assets pass to heirs based on the beneficiary designation and not your will.
Financial planning is important even for those who are young and seemingly invincible. Feel free to contact our office for help with your financial planning needs.

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October 2016 Newsletter- Is Your Relative Hiding Their Alzheimer’s?

Is Your Relative Hiding Their Alzheimer’s?

Las Vegas Financial AdvisorActor and funnyman Gene Wilder recently died from complications from Alzheimer’s. It was revealed that he had hidden his condition from most people for over three years. Wilder reportedly wanted his fans to remember him for roles in films like Willy Wonka, Young Frankenstein and Blazing Saddles, and not this affliction. Sadly, this is all too common among Alzheimer’s sufferers.

Many Alzheimer’s suffers try to hide their symptoms fearing a loss of control over their own affairs and of losing their independence. This same fear and the inability to confront their impaired cognitive skills can lead to severe financial consequences for your parents and other relatives.

Discussing the issue

The best time to discuss dealing with the potential symptoms of Alzheimer’s with your parents or relatives is before they exhibit these symptoms such as loss of memory or confusion. Urge them to designate a family member or trusted friend to handle their financial affairs in the event that they cannot. As your parents or relatives age consider having periodic family meetings to discuss their finances. The elderly are common targets of financial fraud and abuse. Those with Alzheimer’s are easy targets.

We work with multiple generations of many families and we understand how difficult this issue is, and the need for financial conversations. We welcome including conversations with family members regarding your financial situation, at your discretion, of course. As independent financial advisors in Las Vegas we can offer a wide array of options for you and your family.

Retirement Savings ‘Tales’

Las Vegas Financial AdvisorSometimes people make excuses why they think they don’t need retirement savings, or additional retirement savings options. This results in a ‘retirement savings tale’, and isn’t necessarily true regarding their own ideas that may be self- designed, or advice from someone else. Here are some common ‘tales’ about retirement saving:

Tale #1- My work retirement plan is enough. If this is the only thing you’re doing, are you saving the maximum allowable or only enough to receive your match from your employer? Secondly, a discussion on pretax and taxable retirement savings would be a benefit to you so you fully understand how this can affect you in retirement when you access these savings. Employer retirement savings is only one of many things you should be doing to prepare yourself for retirement.

Tale #2- I’m still young and can wait to start saving. The younger you are when you start, the more time you have to accumulate retirement savings and need to save less per month to reach your goals.

Tale #3- Paying off debt is more important than saving for retirement. If you are always accumulating debt you will delay retirement with this idea. At least start with participating in your company retirement plan at the amount required to receive a company match. Add another retirement savings vehicle, such as a Roth IRA with an amount that fits into your budget. As you pay off your debt, save that additional money left over each month for retirement.

Tale #4- Social Security will be enough retirement. This is based on inaccurate information. If you rely on only this you will have to continue working full time to make ends meet. Given the current Social Security Benefit Estimator, the age you become eligible to receive benefits may change, as well as the benefit amount. The estimator indicates a lower benefit paid at a later age for those born after the mid-1960’s.

Tale #5- I will be receiving an inheritance and don’t need to save more than I already am. If you think you may receive an inheritance, that’s great! Consider how much you know about the inheritance and all aspects of how it will be divided, if there will be a tax consequence (to you), and if there has been planning from the grantor that protects the estate so that you actually receive something. Factors involved could be long term care, debt of the grantor, how long the grantor lives and if it will deplete the estate.

Variable Annuity Distribution Options

Las Vegas Financial AdvisorIf you’re retired or nearing retirement, you will be faced with the decision as to how to take money from your variable annuity. Different contracts have different rules. One option is annuitizing, with these common options:

Single Life Option. This is a payout for the life of the contract holder only. It offers the highest payout level, but payments stop at death. Nobody else will receive any further payments.

Joint-Life Option. This allows for your spouse to collect a portion of the annuitized payout if you die first. Also called the joint and survivor option the payout will be less than the single life option. Typical options are 50 percent, 75 percent or 100 percent. For example, with a payment of $2,000 per month, the 75 percent option would pay $1,500 to you surviving spouse.

Period Certain Option. Benefits are paid for your life with a certain or guaranteed period typically 10, 20 or 30 years where a beneficiary will receive the remaining payments if you die before the end of the period.

Taxes are due on the portion of the account that is due to gains on your initial investment and will be subject to taxes; the rest will not as it is considered a return of your basis or the amount invested. Other payment options are also available and will have varying tax treatments. Please contact us for help in determining the best option for you.

Don’t Forget Your RMD

Las Vegas Financial AdvisorAs we head towards the end of the year, those of you who are age 70 ½ or older need to be sure that you’ve taken your required minimum distribution(RMD) from IRAs or other tax-deferred retirement accounts. This can also apply to some of you younger than 70 ½ if you were the beneficiary of an inherited IRA account. The penalties for not taking the full amount by the end of the year can be steep. The penalty is 50% of the untaken amount and you will still owe the income taxes that would normally be due.

For those who turned 70 ½ this year and are taking their first RMD you have the option to wait until April 1 of next year. Understand, however, that this will require you to take two distributions next year. This could result in a larger tax hit than you might be expecting so it pays to take a look at this before deciding. A couple of tips to consider this RMD season:

If you are charitably inclined and don’t need some or all of the money from your distribution, you can donate some or all of your distribution to a qualified charity. The limit on this is $100,000. The advantage is that this will reduce your taxable income while helping you accomplish your charitable objectives.

If you are still working and contribute to a 401(k) you do not have to take an RMD on the money in that 401(k) as long as you are not a 5% or greater owner of the business and your employer has made this election. Furthermore, if you have money in an IRA that was originally contributed on a pre-tax basis to the IRA, or rolled over from another retirement plan, you can roll this money into your current 401(k) if the employer allows for this. The benefit is that this money is not subject to the RMD until your leave that employer.

For those of you with an inherited IRA you will need to take an RMD if the original owner was taking RMDs when they died or if you are 70 ½ or older. The amount, however, is based on your age which can allow the account to be stretched for younger beneficiaries. It is important to take you RMD by the end of the year.

Please feel free to contact our Las Vegas office with any RMD questions you may have with a certified financial planner.

does an election year affect your portfolio

September Newsletter | Does An Election Year Affect Your Portfolio

Understanding Your Employee Benefits

Understanding Your Employee BenefitsAs you work and save money for retirement, take time to understand what benefits are offered at your employer in addition to your retirement plan.  Even if the focus of your relationship with your financial advisor is your retirement and other securities related assets, employer benefits should always be discussed.  Consider the following benefits and how they can benefit you:

Employer Sponsored Retirement Plans.  Always participate at the amount to receive your match from your company.  Don’t leave ‘free money’ at your company, use it to build your assets by participating.  This will be a part of your financial planning information, so always remember to bring your statements to meetings.

Employer Sponsored Life Insurance.  Even if you have other life insurance, this is the most inexpensive way to add protection for your family and your assets if you die.  These types of plans ‘group’ you with other employees so the premium cost is reduced. Sometimes these plans are portable if you leave your employer.  There may be stipulations on ‘aging out’; check with your HR department to see if you’re insured after age 65 (some plans drop you after this age).  A death is one of the events that causes early liquidation of retirement assets if a family isn’t prepared with adequate life insurance.

Employer Sponsored Disability Insurance.  Not being able to work will deplete financial assets if you’re not prepared.  Disability insurance replaces lost income that Social Security Disability benefits do not cover.  Because being on Social Security Disability insurance doesn’t replace 100% of your income, additional coverage is a good idea if you’re in your prime earning years.  Disability insurance is underwritten based on your profession, age, and possible risk of injury in relation to your work activity.  Many people are unaware that when taking Social Security Disability Benefits, your Social Security Retirement Benefits are reduced or eliminated in retirement.

Even though I may or may not provide you with additional coverage options, understanding what your benefits are and if you’re participating in them will help me understand additional risks to your portfolio other than the stock market.

Does an Election Year Affect Your Portfolio?

does an election year affect your portfolioRegardless of if you are a Republican or a Democrat, it doesn’t matter much which party wins the election.  Some people may believe that the party that wins will determine market outcomes, which is not supported by scientific data from past elections. What does matter, is the fact that thereis an election!

Starting in 1833, The Dow Jones Industrial Average has gained an average of 10.4% in the year before an election, and on average 6% in the election year.  In contrast, once elected regardless of party, the first and second years of a President’s term see gains of 2.5% and 4.2% (http://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html).  Some speculate that the drop in the market happens when the public realizes whether or not the campaign ‘proposed agenda’ of the elected President is going to happen.

Our current cycle is not normal and because past performance (presidential or stock market related) does not guarantee future results, don’t rely on past data related to an election year to make changes in your portfolio without consulting and conducting a review.

Becoming a Consumer of Healthcare now and In Retirement

Becoming a Consumer of Healthcare now and In RetirementThe numbers are in, according to the latest healthcare study by Fidelity that a couple retiring this year (2016) will need $260,000 in retirement savings to cover their healthcare costs, from age 65 until their death.  Although this is a ballpark figure, it should be a part of your financial planning as on-going costs.  This number is estimate to rise between 4%-6% each year.

This estimate applies to retirees with traditional Medicare insurance and includes monthly expenses associated with Medicare premiums, co-pays, deductibles, and out of pocket prescription expenses.

So what can be done to help lower that number?  Become a consumer of healthcare.  Just like most things we buy, healthcare should be ‘shopped’.  If you receive a diagnosis, ask for a second opinion.  In some instances, you may be able to ‘shop’ out of network, or in network.  As a consumer, it is up to you to ask questions about your own health and don’t assume that the treatment plan will be the same from MD to MD.  If you need a surgery, shop hospitals that are on your insurance plan to find out what the procedure will cost.  If you are a Medicare patient, most hospitals (but not all) accept Medicare Insurance.

If you have concerns about how this number may impact your retirement savings, schedule a meeting with our office to include this in your financial plan.

Modern Portfolio Theory: An Introduction

Modern Portfolio Theory: An IntroductionEconomist Harry Markowitz was the first to demonstrate that a diversified portfolio can deliver performance with less risk when multiple assets are used to construct a portfolio.  With his theory, called Modern Portfolio Theory, an investment’s risk and return should not be viewed alone, but how the investment effects the overall portfolio’s risk and return.

He proved that by using Modern Portfolio Theory (MPT), diversifying a portfolio could be done at no additional cost.  Markowitz referred to diversification as being the ‘only free lunch’ in finance.  His paper called “Portfolio Selection” was published in 1952 in the Journal of Finance. He later was awarded a Nobel Prize for his contributions.

Because of his findings, Modern Portfolio Theory is still used day.  Diversification is still an integral part of portfolio management and is what we focus on each time we review your portfolio’s progress, rebalance, and re-examine your financial plan.

richard londond las vegas financial advisor

August Newsletter | Why “Brexit” Really Matters

aug 1Reporting to Protect Seniors From Financial Abuse

July 5th, 2016 marked the passing of The Senior Safe Act of 2016. What this bill means to you, and the financial services industry, is another layer of protection for seniors who may be, or are, at risk of financial abuse by another individual.
In the past, financial advisors could be liable for disclosing information regarding possible senior financial abuse to regulators that is considered ‘private’. In some instances, family members that were taking advantage of a senior adult could seek recourse from the financial advisor reporting them who disclosed information about the senior adult’s financial information.
With the passing of this bill, advisors and firms that have had training on elder financial abuse, can report to state and federal regulators, law enforcement, adult protective services, or any other appropriate agency suspected elder financial abuse of a client by another adult without fear of being sued or prosecuted for disclosing private information about the victim.
If you have suspicion of senior financial abuse, contact your local law enforcement agency, or The Secretary of State office in the senior’s state of residence.

Why ‘Brexit’ Matters

aug 2‘Brexit’, which is an abbreviation for the referendum that British voters passed to leave the European Union on June 23rd, has been front and center in our media. So why does this vote matter to investors worldwide and here at home? These are the reasons:
1. Markets hate Uncertainty. Our 401(k)’s, IRAs, and other investments are invested into companies that do worldwide business. The company values are effected by global economic conditions, which in turn has to do with how much they are selling in the world market and their profits, or losses. This impacts our retirement savings.

2. Businesses May Have Fallout. If there is a decrease in the monetary value (in this case The Euro), oversees companies may not purchase US goods from US businesses. Global economic buying and selling can change.

3. Speculation May Cause Further Worldwide Recession. Reaction to what may or may not happen in the markets can cause investors to make bad decisions. It can also cause everyday purchasing by consumers to slow due to what they are seeing in media coverage.

4. Weakened Euro Values. The Euro, which is the currency of 19 of the 28 member European Union states has decreased in value, which impacts the buying power of these countries. On the flip side, the US Dollar has increased in purchasing power in these countries

Because we do not know how ‘Brexit’ will play out, evaluate making any changes to your portfolio before you have all the information. It is not recommended liquidating in a down market situation. If you have any concerns, please contact our office to schedule a meeting.

Diversify? Here’s Why!

aug 3Many investors have heard the term ‘Diversify’ but don’t always understand it or why they should choose to diversify their portfolios. In some instances investment choices in their company retirement plans can limit investment options, offsetting investor knowledge or experience. Additionally, investors may choose to invest in ‘similar’ asset classes because of their ‘comfort level’ in comparison to other investment sectors, geographical areas, or investment classes.
Because of how volatile our markets have been over the past few years, examine your investments and add different asset classes to your portfolio if make sense to your personal situation. Not putting ‘all of your eggs in one basket’ is important because we can’t determine if what is performing now will continue to perform in the future. That includes investing on a worldwide perspective.
There is no formula to finding the top performers in sector, region, or asset class. Therefore, it makes sense to not concentrate all of your investments in one area. Diversification should include differing asset classes from various regions in many types of business types in order to avoid the peaks and valleys that each can bring.
For a complete portfolio analysis and to update your diversification, a minimum of a once a year meeting is highly recommended.

What Are You Paying For?

aug 4Investment costs are part of your financial life and can’t be avoided; there is no such thing as a ‘free investment’. Understanding all of the costs associated with your portfolio can help you determine the full impact over years of saving and investing, many times over 30 or more years. Costs represent dollars that aren’t being invested.
The first thing to understanding what you’re paying for is to ask questions. Many investors don’t understand all that is involved in investment costs. Here is a short list of costs that may be impacting you:
1. Advisory Fees. This is paid yearly to an investment advisor providing advice and managing your portfolio. This may be paid to an individual, company, or both who share in the fee revenue

2. Commission. This is paid when you either buy or sell a security. Depending on your advisory fee, this may be included (in what’s called a ‘wrap account’). Your advisor can help you understand how this may or may not impact you.

3. Annual Operating Expenses. This is paid by the fund from assets to cover management fees and other expenses directly to the company that holds the fund.

If you have a 401(k) retirement plan, you may have costs associated with that plan. In rare instances, your employer may be paying these for you. Most plans pass the cost to the employees that are participating in the company retirement plan.
There may be other investment costs associated with your portfolio depending on the types of funds you have. One way to find out what you pay is to have a financial review and ask to have your funds evaluated for costs with a breakdown of each.
One should remember that investments should be evaluated on how they fit with your goals, timeline, and portfolio as a whole, and not entirely on their cost.

richard londond las vegas financial advisor

July 2016 Newsletter | Long-Term Insurance, Identity Theft, Company Stocks, and More!

Do You Need Long-Term Care Insurance?

july 1As Baby Boomers age, one of the planning decisions that needs to be made is how to go about providing for their long-term care needs.

The cost of a one-year stay in a nursing home varies widely across the country. According to insurer Genworth the cost of a single room in a nursing home averages $87,000 per year with costs running as high as $136,000 per year in New York and $240,000 in Alaska (2015). In-home care can cost $50,000 per year or more.

Here are some factors to consider in deciding whether to buy long-term care insurance.

  • The cost of long-term care or in-home care in your area.
  • Your net worth. There are no hard and fast rules here. One rule of thumb says that those with more than $2 million should consider self-insuring, while those with a net worth under $500,000 will likely be covered by assistance programs such as Medicaid.
  • Do you want to leave an inheritance? If so long-term care insurance can be a tool to help you preserve your estate for your heirs.
  • Your spouse’s financial security. Often caring for an ailing spouse can drive the caregiving spouse to financial ruin. Long-term care insurance can help avoid this.

Do you need long-term care insurance? Everyone’s situation is different and we can help you evaluate whether or not long-term care insurance is a good solution for you based on your assets and need for asset protection.  The discussion between us of long term care protection is part of the financial planning process.


 

Preventing Identity Theft

july 2Seemingly every day there is a story making the news about a major retailer or governmental agency being hacked, placing the identities of many people in danger of being stolen. Identity theft is a serious problem with serious ramifications for victims.  While there is no way to totally prevent identity theft, here are a few steps you can take to prevent it or at least minimize your risk:

  • Don’t freely give out your Social Security number, carry your social security card, birth certificate or passport around with you.
  • Make a copy of your credit cards and your driver’s license, and put the data in a safe place, to ensure you have this information if needed. 
  • Take the extra copies of the receipt from a credit card transaction with you and shred the extra copies.
  • Teach your children never to give out their email address, passwords, or any other personal information.
  • Keep the virus and anti-spyware program on your computer up to date.
  • Check bank and credit card accounts regularly for unexplained transactions.
  • Use your bank’s account app and set it to alert you each time a transaction is made.
  • Create complicated passwords for your online accounts.

Many identity theft protection programs may not be all they are cracked-up to be so you need to be careful in deciding whether or not to purchase one of them.  Our increased use of the internet for just about everything puts us at risk for cybercrime and identity theft. Caution and common sense are key to protecting yourself and your family.


 

How Much Company Stock is Too Much?

july 3Over the years many of us have probably been envious of employees of companies like Google, Facebook and Apple who have become rich off of their ownership of their employer’s stock.

The flip side of this is Enron, a high flying company until it went bankrupt after a scandal surrounding the company was revealed in October of 2001. The stock was widely-held by company employees, including in their retirement plan accounts. Needless to say the demise of the company caused many of these employees to suffer steep financial losses.

There is no hard and fast rule regarding the amount of employer stock to own. However, many financial experts suggest keeping the amount to 10% of your portfolio or less.

The issue with holding too much employer stock is that if the company has financial problems you may find yourself out of a job. In addition, if you hold large amounts of company stock you may find that the stock price will suffer a steep decline as well. If you hold the company stock in your retirement plan not only could find yourself unemployed, but you might also see vast portions of your retirement savings eroded as well.

It is never wise to be overly concentrated in any single holding, especially your employer’s stock. Investing in other companies stock inside of your 401K plan is another option that you may have.  Please give us a call to review your portfolio and to help you understand risks surrounding ownership of your employer’s stock as well as provide other types of investment choices that will help you accumulate retirement savings.


 

3 Investment Mistakes Baby Boomers Should Avoid

july 4It is important to save and invest for retirement over the course of your working career. This doesn’t stop for Baby Boomers approaching retirement or who are already retired. Here are 3 investing mistakes that Baby Boomers should avoid.

Mistake #1:  Taking too little risk

It may be tempting to become very conservative with your investments as you approach retirement. While nobody is suggesting that you invest like a 25-year old, taking too little investment risk can set Baby Boomers up for failure in retirement, defined as running out of money. Inflation is still your greatest retirement threat and part of your portfolio should be invested to allow you to stay ahead of inflation.

Mistake #2:  Letting fear drive your investing decisions

Looking back to the financial crisis of 2008, the news was filled with stories of many investors who sold out of the market at or near the bottom. Many of these tragic stories involved Baby Boomers. Not only did these investors book heavy realized losses, many missed out on some or all of the ensuing stock market rally seriously damaging their ability to retire as planned.

Mistake #3:  Failing to plan your retirement withdrawal strategy

It is critical to develop a strategy for withdrawing money from your various accounts to meet your income needs during retirement. Failing to plan for these withdrawals and failing to adjust your investment strategy accordingly can have a negative impact on your quality of life during retirement.

Are you a Baby Boomer and unsure about whether your investment strategy is right for your situation? Contact our office to schedule a meeting to discuss your current situation and review your portfolio.

retire fun

Retire and Spend Courageously

Retirement is a time of excitement and anxiety regarding if your savings will last through your entire remaining life.  Many retirees find that their spending is more costly in the beginning, and slows as they age.  If you are sure you’ll be cutting back as you age, you can budget for these changes.  Here is a short list of tips to help you get started on your courageous journey:

  • Have a financial plan completed so you have an overview of what is available to spend from all of your retirement income sources.
  • Prepare yourself for market conditions by determining what income sources to spend at designated times.  In a down market, be able to adjust withdraws to accounts that are fixed income streams so you don’t liquidate sources that will rebound at some point.
  • Review your investments every six to twelve months.  Retiring doesn’t mean everything is on auto-pilot.  This is the time to review investments even more closely.
  • Evaluate your expenses.  Take a look at your spending to determine what is left over for other items that aren’t necessary but enjoyable such as vacations and larger purchases.
  • Assume lifestyle adjustments are a part of aging and may come sooner than expected.  Health circumstances, market changes, and spending habits may need to be changed and updated in your financial plan.

 

richard londond las vegas financial advisor

June 2016 Newsletter

Mental Accounting: Help or Hindrance?

Budget Finance Cash Fund Saving Accounting Concept

Mental Accounting attempts to describe the process where people code, categorize, and evaluate economic outcomes for their money.  This term was developed by psychologist Richard Thaler in the late1980s when he discovered that people may have multiple mental accounts for various things, but all coming from the same kind of resource; for example money earned from their jobs.

People tend to put that money into categories, such as grocery money, mortgage payment, etc.  But how do they react with something like a tax return?  What about a bonus from their employer?  This is money from the same source, but what one does with it has to do how they categorized it in their ‘mental accounting’.

This same theory shows that people’s spending is directly tied to which ‘mental account’ they placed it into.  Have you ever justified a purchase based on which mental account the money is coming from because you decided to ‘trade spending’ inside your mind?  For example, deciding to buy a new outfit instead of going out to dinner this week.  But in reality, the money is the same and from the same source.

When it comes to Mental Accounting and your investments, be careful.  People that use mental accounting may set up two investing accounts; one that is overly conservative and one that takes excessive risk.  Working together with a financial advisor regarding your investments can help to eliminate mistakes in the types of investments you’re participating in due to Mental Accounting.

To avoid having Mental Accounting be a hindrance in your life, think about the best way to use the money that you make regardless of how it comes to you.  If you have debt, take care of that before spending on things that are extra or lavish.  Next, decide to use the money for future things, such as your retirement and fund those accounts fully.  Lastly, the additional money can be put into unnecessary categories for you to ‘mentally arrange’ as you prefer.

Tips to Avoid Elder Financial Fraud

Senior African American couple at homeSadly, financial fraud against senior citizens is much too prevalent these days. According to Consumer Reports there are some 5 million cases of elder financial abuse each year, but only 1 of every 25 are investigated by law enforcement.

What can you do to protect yourself or a loved one from being a victim? Here are some tips:

 

  1. If you are concerned about your mental competence, make sure a trusted family member or friend is aware of your situation and enlist their help in managing your finances. Scheduling a family meeting with your children or close relatives can help both you and your loved ones assess how to best deal with the situation.
  2. Remember the IRS will never call regarding an issue, they always initiate contact via the mail. Never fall for threats or pressure to send money or face arrest from this popular scam.
  3. Another popular scam is someone posing as a healthcare worker asking for personal information from you. Never give out information like your Social Security number to anyone over the phone, this may result in having your identity stolen.
  4. Review your account statements on a regular basis. Make sure that there are no transactions that you were not aware of. If you see something that looks suspicious call your financial advisor and ask about it.

If you are concerned about protecting yourself or a family member from elder financial fraud, contact your state Attorney General’s office for assistance on reporting fraud and for information on current scams in your area.

Retire and Spend Courageously

Happy Retirement card with colorful background with defocused liRetirement is a time of excitement and anxiety regarding if your savings will last through your entire remaining life.  Many retirees find that their spending is more costly in the beginning, and slows as they age.  If you are sure you’ll be cutting back as you age, you can budget for these changes.  Here is a short list of tips to help you get started on your courageous journey:

  • Have a financial plan completed so you have an overview of what is available to spend from all of your retirement income sources.
  • Prepare yourself for market conditions by determining what income sources to spend at designated times.  In a down market, be able to adjust withdraws to accounts that are fixed income streams so you don’t liquidate sources that will rebound at some point.
  • Review your investments every six to twelve months.  Retiring doesn’t mean everything is on auto-pilot.  This is the time to review investments even more closely.
  • Evaluate your expenses.  Take a look at your spending to determine what is left over for other items that aren’t necessary but enjoyable such as vacations and larger purchases.
  • Assume lifestyle adjustments are a part of aging and may come sooner than expected.  Health circumstances, market changes, and spending habits may need to be changed and updated in your financial plan.

Just Ask

questions answers ask the right question and get an answer helpAsking questions in the investment world can save you from mistakes.  There are all types of questions to ask that pertain to your investments.  One good place to start is by asking about the costs associated with your investments.

There is no such thing as a “no cost” investment, but understanding if those charges are up front at the beginning of the investment, at the end of the investment, or if they are continual over the life of the investment will help you decide the best option for your situation.  Asking questions is part of being active in your investing.

A second place to ask is about the investment choices and how they fit into your financial plan.  Providing you with information will help to ensure you are comfortable with investments I may be recommending to you.  When it comes to the choice to invest, it is really up to you.  As your financial advisor, I help to provide you with options to meet your goals.  When you take time to ask questions, I have a better understanding of where you may need additional information to make the best decision for yourself.

inheritance-community-chest

What To Do With Your Inheritance

 

What To Do With Your Inheritance

Doing your homework and seeking advice is highly recommended when an individual or family is faced with what to do with an inheritance. Understanding your options is crucial in a potential life changing event.

Inheritance

Depending on the stage of life you are in when you inherit assets will have a lot to do with how you want to plan for managing them. For some people, this may be a lot of money and they have never experienced this type of wealth in their life and for others it could mean dealing with assets they’re unfamiliar with. Either way, it is crucial that you meet with a seasoned financial advisor who can hold your hand through this time. In other words, please do not go out and buy a new car right away! I know that sounds funny, but I’ve seen it before and that may not be the best financial move for you at this time. When I work with clients who inherit assets I make sure they have the following:

  1. Financial Plan
  2. Proper Structuring of all assets
  3. Income needs met

Inheriting assets can typically happen in two ways. You inherit monies though a Trust or you were left as beneficiary on an asset. In 2016 the estate tax exemption is $5.45 million. So for the most part if you inherit under $5.45 million there is no federal tax due. Check with your CPA in regards to if your state has state tax for inheritance. There are some other variables that play into this $5.45 million exemption so please consult your CPA or qualified tax professional to clarify your potential tax liability.

When inheriting assets through a Trust you receive asset/creditor protection of those assets. Let’s make up a scenario. Let’s assume your parents created a family revocable trust and upon passing of the last parent you were the sole beneficiary to their estate. Let’s also assume you are married, the relationship is on the rocks, have had some credit issues, and creditors are on your back. All assets you inherited, as long as you don’t commingle them with your spouse stay your assets forever and even in the event of a divorce as a GENERAL statement. Please consult your Trust attorney for more details. When your parents passed away, their revocable trust now became an irrevocable trust. As long as assets stay in the trust, creditors cannot attach liens or judgement on those assets.

Inherited IRA

Inherited IRAs can be very tricky. Please talk to a qualified financial advisor about your options in regards to withdrawals you must potentially take on this asset. There are some options for you in regards to the Inherited IRA on how you can take distributions. There has been some recent court ruling that now states Inherited IRAs do not have the same asset/creditor protection as traditional or Roth IRAs.

 

I just wanted to lightly touch on a couple popular topics when it comes to inheriting money. Hopefully you found this information helpful. Please give me a call or email if you have inherited some money or are about you. I have tremendous experience helping individuals and families with this process. I want to help ensure you make use of these assets so you may be able to leave a legacy as well.

Pension

Are Pension Buyout Offers Really a Good Deal for You?

In recent years many large employers have offered former employees who are not yet at retirement age the option to take a pension buyout. These offers usually offer several options

  • Take the value of your pension as a lump-sum payment which can be rolled over to an IRA. The advantage is the ability to manage this money   yourself and perhaps allow it to grow to level that would provide a greater benefit than taking your payments on a monthly basis.
  • Take a monthly payout now (earlier than your normal retirement age).
  •  Do nothing and take your original pension payment (or a lump-sum if offered) at your normal retirement age.

Factors to consider:

  • Will taking one of the buyout options put you in a better financial position than doing nothing and waiting until your normal retirement age?
  • Are you comfortable managing a lump-sum or do you have a financial advisor you trust who can help?
  •  Is your financial and/or health situation such that taking the monthly payments now would make sense?

These types of offers are likely to continue due to the increasing costs of administering pension plans and the desire to get the liabilities associated with the pension payments for former employees off the books.

If you receive a pension buyout offer give us a call. We can help you evaluate the offer and make the best choice for your personal situation.

Gavel-300dpi-Small

New Fiduciary Rules May Have A Huge Impact On Your Portfolio

What the New Fiduciary Rules Mean for You

In early April the Department of Labor released the final version of their fiduciary rules. These rules apply to financial advisors who provide advice on retirement accounts such as an IRA or a 401(k). The rules state that the advisor must act as a fiduciary, in other words that we must provide advice that is in your best interests. For most financial advisors this is nothing new, though based upon the manner in which they are compensated or the financial products recommended, additional disclosures might be required.

Most notably financial products where commissions are involved will require the execution of a disclosure document called the Best Interests Contract Exemption or BICE. The DOL spells out a number of situations where this disclosure is required, both for advisors who earn compensation via commissions and fee-only advisors.

The DOL listened to the financial services industry and the final rules were modified to be more workable for financial advisors while still providing the disclosure and protections that clients and investors like you deserve.

Depending upon your financial advisor’s business model you may see some changes in the way they do business, or in some of the products and services offered to you.

If you have any questions about these new rules and how they impact you, please contact our office to set up a meeting. Our mission has always been to do what is best for our valued clients and that remains unchanged.

Richard London CFP

May 2016 Newsletter

What Impact Does Working Have on My Social Security Benefits?

Senior Hispanic woman working on computer at home

There is a lot of confusion about the impact of working on those who are taking their Social Security benefits. Here are a few things to know.

· If you are drawing a benefit and you are younger than your full retirement age or FRA (66 for those born prior to 1960) your benefit will be reduced by $1 for every $2 in earned income over $15,720 in 2016.

· This drops to $1 for every $3 in earned income over $41,880 in the year in which you reach your FRA.

· Once you reach your FRA there will be no reduction in benefits no matter how much earned income that you have.

· Earned income is defined as income from work or self-employment and includes such things as your salary, any bonus or your net self-employment income.

· Any benefits that are reduced due to too much earned income are not truly lost, they will be added to your benefit once you reach your FRA.

In addition, your benefit could be subject to taxes if your combined income exceeds certain thresholds. Combined income is your adjusted gross income plus one-half of your Social Security benefit plus any income earned from tax-exempt investments like muni bonds. There is no age limit here and this includes income from all sources, earned or unearned.

Social Security can be confusing and if you have any questions regarding your benefits, including when to claim them, contact your local Social Security Administration office a call to schedule a meeting.

 

When Your Nest Egg Looks Scrambled

Blue speckled eggs lying in a bird's nest

Approaching age 50 with no nest egg, or a small one can create a feeling of panic. Some people have a number in mind, such as 1 million, and set that as a savings goal even though they have barely started saving. Is that a realistic retirement savings number and what should you do to try to reach it?

Start Saving and Investing- A good place to start is to double what you should have started to save twenty years ago which is now close to 30%! If that doesn’t seem possible, take a look at what you are currently saving and investing and increase it as much as possible.

Work Longer- The traditional retirement age of 68 maybe needs to be pushed out to age 70 or 72 for you. The longer you work, the more you will accumulate in retirement savings and social security.

Consider Selling Your House- If your house is more than 60% paid off, consider selling and purchasing a smaller home (with cash, no loan), and investing the excess. Take note of property taxes, repairs needed, and if downsizing will benefit you. Factor in the area you’re living in to determine if you should move to a more affordable area of the country.

Have a Financial Plan Done Each Year- Keeping current on your saving progress, evaluating and adjusting your portfolio are very important to your success. Even if you feel you aren’t making much progress, it’s important to meet and keep you working towards your goal.

Not having enough retirement savings is a serious thing and I want to help you as much as possible. Making informed decisions by evaluating your progress will help you ‘unscramble’ a future retirement mess.

 

Letting Go Of a Losing Investment

blue sailboat in the ocean. Can be used for boat ocean water travel harbor themes

Letting go is never easy, especially when you have to change your thoughts to what things really are, not what they once were. Sometimes people use irrelevant information they have from the past as a reference point to help them decide something now, even if that information has no bearing today. For example, deciding to buy a new construction house now, thinking that it should cost the same as the one you bought 20 years ago! This use of irrelevant information to make decisions now is called “Anchoring” by psychologists.

When it comes to investments, the same “Anchoring” can happen. Investors will hold onto an investment while waiting to break even with what they paid instead of selling it to realize a loss. Investors can take on an even greater risk while they wait hoping it will go back to its purchase price.

By meeting regularly to review your investments, together we can determine if there are some “anchors” that are causing rough sailing in your investment plan.

 

What the New Fiduciary Rules Mean for You

Conceptual image of law enforcement justice and sentencing with a closeup view of a wooden judges gavel lying on a law book

In early April the Department of Labor released the final version of their fiduciary rules. These rules apply to financial advisors who provide advice on retirement accounts such as an IRA or a 401(k). The rules state that the advisor must act as a fiduciary, in other words that we must provide advice that is in your best interests. For most financial advisors this is nothing new, though based upon the manner in which they are compensated or the financial products recommended, additional disclosures might be required.

Most notably financial products where commissions are involved will require the execution of a disclosure document called the Best Interests Contract Exemption or BICE. The DOL spells out a number of situations where this disclosure is required, both for advisors who earn compensation via commissions and fee-only advisors.

The DOL listened to the financial services industry and the final rules were modified to be more workable for financial advisors while still providing the disclosure and protections that clients and investors like you deserve.

Depending upon your financial advisor’s business model you may see some changes in the way they do business, or in some of the products and services offered to you.

If you have any questions about these new rules and how they impact you, please contact our office to set up a meeting. Our mission has always been to do what is best for our valued clients and that remains unchanged.

investment-scam-mp

5 Common Investment Scams

Investment scams aren’t something new; unfortunately they have been around for hundreds of years.  What is new is the way that scammers try to get to you with more complex offerings.  Be aware of these common scams:

Private Event with ‘Free Lunch’- These are an invitation only event, where you are invited to find out about an exclusive investment only offered to those in attendance.  Generally these are offered as a “get rich quick” opportunity while being fed a meal, and target retirement age investors.  Many times the invitation is from someone you don’t even know.

Unregistered Investments- Just because the investment sounds good and the documents look real, doesn’t mean that they have been approved for sale to the public through regulatory agencies (ex. Securities Exchange Commission).  These are typically sold through someone who isn’t a state registered representative of any state registered firm.  If you have any question on the investment representative or firm, contact your state insurance department.

Investing in Precious Metals and Mines- The mining company or metals that you own may not exist.  Scammers know you may never visit the mine you supposedly own because they are located outside of the United States.

Ponzi Schemes- This is the number one type of scam, which can go on for decades if no one needs distributions that are larger than the amount of money the scammer has.  Unfortunately these usually involve friends and family, since the investor unknowingly pulls them in through introduction to the scammer.

Loans, Private Bank Scams, or Private Placements- These are investments that seem like they are part of a private bank and reserved only for the ‘wealthy’ to participate in.  Often, there is no real bank that is registered with the state and monitored by banking regulatory agencies.  These investments are presented to you as an opportunity of being ‘lucky to participate’, and promise excessive returns that sound real because of their exclusivity.