3 Key Money Moves Every Parent Should Make
Whether you are expecting your first child or have been a parent for years, finances and building a future for your family go hand-in-hand. Luckily, there are money moves you can make now to help manage financial stress, support yourself and your loved ones, and help your children as they get older. Here are three key financial moves all parents should consider making.
Review and Update Your Life Insurance
For many, life insurance is a necessary but unmanaged expense for a good reason. It is not pleasant to consider a situation where your life insurance policy may become relevant to your loved ones. However, for parents, in particular, having adequate life insurance might be the difference between your children struggling or enjoying a comfortable future.
Many employers offer life insurance to their employees, often at a specific multiplier of their salary. For some families, this amount may be adequate; but in other cases, you may need to purchase an additional term policy that provides coverage until your youngest child is an adult. It is worth reviewing how much coverage you have, then comparing this with your average projected earnings over the next decade or so.
Also, update your beneficiaries after any major changes. A divorce decree does not remove an ex-spouse’s name from a life insurance policy. For any changes in your marital status or if a named beneficiary passes away, you must update your list of beneficiaries with your insurer.
Consider a College Savings Account
As anyone who is still paying their student loans could confirm, college costs may be a major expense. For many, student loans are second only to the cost of a home purchase. Fortunately, time is on your side when saving for college for those with young children. The funds you put toward your child’s future college education may have years to grow. In many states, contributing to a 529 college savings account might even provide you with a state tax credit.
Additionally, 529 funds do not have to be for a specific child. If your child gets a scholarship or decides not to attend college, you are free to change the beneficiary to someone else, even yourself. These accounts may also pass down and can be used by grandchildren.
Check Your Health Insurance Coverage
Health care costs might also be a huge part of any family’s budget. And while many employer-sponsored health insurance plans may provide you with decent coverage at a reasonable cost, this is not always the case. Some families with fixed annual health care expenses may benefit from a lower deductible plan that provides more coverage, while other families with infrequent health care costs might find a high-deductible health plan with lower premiums is an easier expense in their budget.
If you are not sure about your options, a financial professional or insurance broker may be able to provide more information.
Important Disclosures
The opinions voiced in this material are for general information only and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
This article was prepared by WriterAccess.
An Engineer’s Guide to Financial Planning
As an engineer, you already likely know the importance of accurate input when it comes to the final equation, which may put you ahead of the game when it comes to managing your finances. Below are a few ways engineers could apply their skills to their financial planning process.
Automate and Optimize Your Finances
In today’s digital society, it’s easy to put bills on autopay and make payments online most of the time. And for regular, steady bills like cable and internet, your mortgage or rent, your cell phone, and any student loans or auto payments, setting up recurring payments may relieve you of the need to remember to pay dozens of different bills each month. As long as you have an adequate financial cushion to cover these bills when they come due, automating your finances may save you time, effort, and the potential for late fees and collection notices.
It may be easy for many people, engineers in particular, to treat their finances with a certain amount of rigidity—especially if you have a steady wage and relatively stable expenses. However, the ability to pivot or adjust your finances to account for changes in income, unexpected expenses, and other surprises may be invaluable. Try to keep an open mind and remain flexible when challenges or opportunities come your way.
Invest for Your Future
Engineers may make anywhere from $50,000 to $80,000 or more per year, well above the median individual income in the U.S.1 Use this salary to your advantage by setting aside some funds for your future, including your retirement.
If your job provides a 401(k), this may be a useful place to stash up to $20,500 per year (or $27,000 per year if you’re age 50 or older).2 Your 401(k) contributions won’t count toward your taxable income, saving you money in taxes while allowing you to save for future expenses. Some employees also contribute up to $6,000 per year to an individual retirement account (IRA) or Roth IRA as long as your earned income meets certain limits. Setting aside these funds now may not only provide you with a nice nest egg upon retirement, but it may also get you in the habit of saving and help you avoid lifestyle creep when your income increases.
Important Disclosures
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
How to Stay Committed to Your Financial Goals
Setting healthy financial goals is critical. Even more important is staying committed to those financial goals.
Keeping yourself committed to your goals may be difficult, especially when times may be financially tough. But by staying on track and focused on your goals, you are more likely to get the long-term outcome you seek.
Below are a few simple tips that will help you to stay on track and committed to your financial goals.
Find Tools to Make Your Efforts Easier
There is a wide range of tools available that can help you stay on track to maintain your goals. These tools generally make financial tasks less hands-on, or even streamline any hands-on processes.
One tool to take advantage of is automation. Start by setting up automatic transfers to the various accounts needed for your goals. This way, your funds will be automatically distributed from your monthly income, leaving you less tempted to use the money for other wants. Set up automatic transfers to retirement accounts, savings accounts, and even vacation and holiday shopping funds.
Other tools to explore and leverage are budgeting tools that allow you to maintain your budget and ensure the money is designated where it needs to be.
Set up an Emergency Fund
No matter how hard you plan, sometimes life will get in the way. Major financial needs such as car repairs, housing maintenance, and even medical emergencies can cause you to put your goals on the back burner. At the same time, you must use your finances to get yourself out of the emergency. What should you do?
By having and maintaining an emergency fund, you will have the money set aside to deal with these issues without having to take money away that is budgeted toward your financial goals.
Track Your Progress and Reward Yourself
Sometimes the greatest motivation is seeing your hard work manifest. Set a regular time to check your progress regularly, whether it is monthly or quarterly. See how close you are with each account or goal so that you will see how your hard work is moving you closer to those goals each period.
This check-in is also a good time for you to check in to see if your efforts are being appropriated properly. You can make necessary adjustments to ensure you stay on-track with achieving your goals.
Need help setting and staying committed to your financial goals? Contact your financial professional today to set up your consultation.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Sources
https://skilledfinances.medium.com/how-to-stay-committed-to-your-financial-goals-aa78dc581056
https://www.fool.com/personal-finance/how-to-set-financial-goals-keep-them-2019.aspx
Content Provider: WriterAccess
Emergency Savings or Your Retirement Goals?
Deciding which one comes first so you know where to focus your efforts
When it comes to personal finance, there are a number of competing priorities that can make it difficult to determine where to focus your efforts. For many people, the choice between building emergency savings and working towards their retirement goals is one of the biggest dilemmas they face. So, which should you focus on first?
In order to answer this question, it’s important to understand what emergency savings and retirement goals are and why they are both important. Emergency savings refers to the amount of money you have set aside in a readily accessible account to cover unexpected expenses, such as a job loss, medical emergency, or major home repair. Retirement goals, on the other hand, are the plans you have in place to provide for yourself financially once you stop working.
Both emergency savings and retirement goals are important, but the order in which you focus on them will depend on your individual financial situation. If you have a stable income and few financial obligations, you may be able to focus more on your retirement goals, knowing that you have a safety net in place in the form of your emergency savings. However, if you have limited income and high debt, you may need to prioritize building up your emergency savings in order to protect yourself from financial shocks.
Emergency Savings First
Here are a few reasons why emergency savings should come first:
Peace of mind: Having a solid emergency fund in place can help you sleep better at night, knowing that you have a safety net in case of an unexpected expense.
Protects against debt: If you don’t have emergency savings, you may turn to credit cards or loans to cover unexpected expenses, which can quickly spiral into debt. Building up your emergency savings can help you avoid this trap.
Provides flexibility: With an emergency fund in place, you have more flexibility to make decisions about your financial future, such as taking on a new job or starting a new business.
Retirement Goals First
However, there are also some good reasons why focusing on your retirement goals first can make sense:
Time value of money: The earlier you start saving for retirement, the more time your money has to grow, which can make a big difference in the amount you have saved when you retire.
Compound interest: The power of compound interest means that the earlier you start saving, the less you have to save each month in order to work towards your goals.
Employer matching: If you participate in a 401(k) or other retirement plan at work, your employer may match a portion of your contributions. By maximizing this match, you can significantly increase your retirement savings.
Emergency Savings vs. Retirement Goals
So, which should come first? Ultimately, the answer will depend on your individual financial situation and goals. In any case, it’s important to find a balance between the two. You don’t want to neglect your emergency savings and end up in debt when an unexpected expense arises, but you also don’t want to neglect your retirement savings and end up struggling to make ends meet in your later years. A good rule of thumb is to aim to have three to six months of living expenses in your emergency fund, and then start contributing to your retirement goals as soon as you can.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This article was prepared by FMeX.
How to Develop a Money Mindset That Aligns with Your Goals
Financial goals are essential. Setting them will help you to obtain the things you want out of life as well as live the lifestyle you desire, both during your working years and in your retirement. But obtaining these goals isn’t always easy unless you develop a money mindset that aligns and drives you to these goals. So how do you create this mindset to give you the ideal chance of obtaining your financial goals?
Determine Your Values
The easiest way to be confident with your financial goals is to align your spending habits with your values. This will allow you to better stick to your spending habits. So to start, you will need to determine the values that are important to you. Ask yourself, what do you value most, your family, your freedom, your security, or your health? In what order do you place these priorities?
Once you have established these values, you need to spend your money in a way that correlates with these values. For example, if your family is most important, you may want to focus on saving for your children’s future education, instead of spending the money on expensive clothing or take out.
Determine What You Need to Do to Work Toward Your Goals
Once you have established your goals and determined what you value most in your life, you will want to make a plan to pursue those goals. Want to be able to travel during your retirement? Come up with ways to increase your retirement savings. Invest more in your employer-sponsored account. Cut back on spending that is not necessary. Learn how to develop and manage a financial portfolio that may help you to address your goals.
Changing your money mindset involves changing the way you think about money and spending it. But making large changes quickly will rarely work over the long term and may act as a deterrent, causing you to give up on your goals before you have a chance to obtain them. After you have determined the changes that you need to make, implement one change each month. That way, you will have time to get used to the small change and how they affect you, without feeling overwhelmed. The changes should be simple such as tracking your spending for the month or opening a retirement savings account.
Follow the tips above to change your money mindset and get your head in a better place which may make your future financial goals seem easier to obtain.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL tracking #1-05318508.
Sources
https://www.ruleoneinvesting.com/blog/personal-development/4-valuable-tips-for-a-healthy-money-mindset
https://lauradadams.com/money-mindset-tips-tools-for-financial-success
Introducing Cash Flow: Our Latest Investment Strategy
The Gatewood Wealth Solutions Investment Committee is excited to announce our new investment strategy: Cash Flow.
For those of you who have been with GWS for a while, you know that one of our core financial planning strategies is creating and maintaining clients’ cash Hub Accounts, which remain liquid should they be needed in the case of a market downturn. That way, clients can keep the rest of their money in the market, without needing to pull it out in uncertain times. This has been the cash portion in your personal risk bucket, which allows us to invest for long-term returns and weather bear markets in your market risk bucket.
As a client, your cash Hub Account acts as an important buffer in providing you a sustainable cash flow no matter the economic conditions. This intentional margin of safety has proved quite helpful during the trailing three years of two bear markets.
But what if that money could also be working for you and earning interest, while still serving as a buffer?
Enter our Cash Flow strategy. This approach brings together the best of both worlds — keeping your cash Hub Account intact, while also using it to generate additional interest for you. Before we implemented this strategy, the money in cash hubs typically generated only 0.35%, or 35 bps. The National Deposit rate for savings accounts is 0.37% with checking accounts much lower.
Am I a Good Fit for the Cash Flow Strategy?
This strategy works best in certain situations, such as:
You meet the account minimum: $50,000 (24-month cash Hub Account target of $50,000)
You like the “personalized pension” approach: Prefer getting monthly checks, similar to pension payments, for living expenses
You’re planning to take out money for big lump sum purchases: Saving for a house, taxes, or anything big lump sum payment in the future with a known time horizon.
The goal of the strategy is to protect you from ever having to sell from your market risk portfolio during a drawdown. By growing your cash Hub Account now, you’ll be better equipped to keep your personalized pension payments coming while also preparing to take out lump sums in the future.
How Does It Work?
We’ve been coordinating the plan and delivering the personalized pension for clients for years; we just haven’t yet maximized the yield in the cash bucket. Historically, we have raised cash to a 24-month target, meaning we don’t have to pull from your portfolio for two years. If you have 24 months of cash, you’re now leaving a lot of yield on the table considering the recent rise in interest rates. So, there is a spread to earn above pure cash (i.e., cash equivalents and bonds).
This strategy divides funds into four risk buckets: Cash Sweep, Cash Equivalents, US Government, and Credit.
Cash Sweep is the shortest-term bucket that holds 0-4 months of expenses, providing the lowest expected return but daily liquidity.
Cash Equivalent is for cash that will be needed within the next 10 months and is invested in money market securities with an average maturity below 60 days, offering higher expected returns than pure cash.
The US Government bucket invests in high-quality US government securities with a longer duration, offering higher yields from the term premium.
The Credit bucket invests in securities with longer maturities and higher credit risk, offering higher expected returns from the term premium and credit premium, with an investment horizon of at least 16 months.
By allocating your cash into funds according to time horizon and need, you can earn interest on your cash hub money while still keeping it appropriately liquid. While there is our Advisory management fee, it’s the same as your family’s current fee, and the yields net of fees are still much higher than the standard 35 bp interest you might make in a savings account or cash sweep account.
* Please note that throughout this blog, “cash” refers to cash and cash alternatives, not cash sweeps, unless otherwise noted.
Disclosures
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
A Tough Times Survival Guide for Small Businesses
Small businesses may often find themselves struggling, and there are many situations in which business owners may find themselves weathering a storm and hoping to make it through. While the strength and fortitude of those who run small businesses can be an asset in helping them succeed when times are rough, there are a few strategies that can make survival a little easier.
Reduce Costs Strategically
When things start to go awry, one of the first things most business owners look for is ways to cut down on expenses to improve cash flow. Unlike widespread significant cuts that large corporations often employ, small businesses must be more strategic with their trimming. For example, if you cut your staff down too drastically, you may find your company spread so thin that you are not able to recover. Likewise, if the cuts are too minor, they may not be enough to make a difference. Take time to make a well-researched analysis of how proposed cuts can affect your business in the present and the future.1
Find Low-Cost Marketing Solutions
Even when times are tough, you need to continue to promote your company so that you are able to keep your current customers and try to obtain more, which can help increase your cash flow. The good news is that marketing your business is still possible even with a small budget. Put your company’s focus on types of marketing that may have a low initial cost and a higher return rate. Content marketing and social media marketing are great ways to draw in new business and get your name in front of potential customers without spending a lot upfront.2
Expand Your Network
When times are tough for your business, they are likely hard for other businesses as well. There is strength in numbers, and connecting with other companies or industries may be the answer to some of your problems. You could cross-promote your business with other peers that provide complementary services, recommend each other’s businesses, or see if there are other ways for you to help each other out.1
Don’t Dwell on Past Mistakes
When things start to go wrong, it is easy to get caught up in past mistakes. Dwelling on the past may make you continue to replay issues and situations that you believe brought you to the current point in your business. This may leave you wondering how the outcome would be if you had changed something. Unfortunately, the past is not able to be changed, and living with regret may prevent you from pushing forward and doing what you need to keep your business afloat.1
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Footnotes
1”The Small Business Hard Times Survival Guide,” Live About https://www.liveabout.com/the-small-business-hard-times-survival-guide-2951407
2A 10-Point Small-Business Survival Plan for Dealing With the Coronavirus, Entrepreneur, https://www.entrepreneur.com/living/a-10-point-small-business-survival-plan-for-dealing-with/347913
Money Matters: Financial Literacy For The Whole Family
Financial literacy is crucial, not only for adults but for everyone in the family. When you have a good foundation of financial literacy, you will have a greater understanding of money and prepare yourself for a brighter financial future. Ready to improve the financial literacy of your family? Below are a few ways to get started.
Help Them Understand How Money Works
One of the first steps in teaching your family financial literacy is helping everyone understand where the money comes from. When it comes to adults, income is most likely to come from a job. For children, their income is most likely an allowance, a part-time job, or the occasional influx of birthday or other gift money. Next, they will need to understand that the things they spend their money on are considered expenses. Get your children to understand the type of expenses associated with daily living, so it won’t come as a surprise when they encounter their expenses.2
Show Them How to Distinguish Between Needs and Wants
An important thing to instill in children early is the differences between needs and wants so that they learn how to spend their money appropriately. Tell them that needs are items that aren’t easy to live without, such as food, shelter, and clothing. Explain to them that wants are items that you would like to have but do not need. It is essential that they understand that spending money on wants should wait until after they are sure that all of their needs are met.1
Let Them Know the Importance of Savings
Children need to know that, in some instances, expenses will be larger than anticipated. Because of that, savings are critical. Saving money when possible is vital to have the funds for large or unexpected expenses. With kids, you may want to start teaching them to save by showing that if they put their money away diligently, they will be able to purchase a much more expensive item they really want.2
Teach Them to Budget
Teaching your children to budget is as important as teaching them how to save. With a budget in place, they will be able to satisfy their needs, learn to put money away for savings, and only spend their money on wants when they have it to spend. Budgeting is also a crucial tool to see where your money is going and find areas where you are able to cut back on expenses if needed. To create a simple budget, you need to account for all possible income and then calculate monthly expenses. If your income is less than your expenses, more income will be needed, or expenses will need to be cut. 1
Teaching financial literacy early on will help you prepare your family for the future and give them tools to help stave off financial problems while helping them pursue their financial goals.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Footnotes
1 Money Matters: Financial Literacy for the Whole Family, ABC Money Matters, https://abcmoneymatters.ca/wp-content/uploads/2019/02/MM-SeminarSeries-Financial-Literacy-2019.pdf
2 Teaching Children About Money, Family Ed Center, https://familyedcentre.org/money-matters-when-parenting/
Gatewood Wealth Solutions Advisor Named to Barron’s Top 1,200 Advisor List
We’re thrilled to announce that Barron’s has once again named John Gatewood to the Barron’s Top 1,200 Advisors List! The list is based on a variety of factors, including assets under management, revenue produced for the firm, regulatory record, quality of practice, and philanthropic work.
“I am tremendously proud of our entire GWS team for this recognition,” said Gatewood Wealth Solution’s Founder & CEO John Gatewood. “Our advisors go above and beyond every day to help clients become and remain financially self-reliant by providing the highest level of personal service and financial advice.”
Thank you to our hard-working team for helping us earn this recognition, as well as to our loyal clients. It is a privilege to serve you!
To review the full list or get more information, visit here.
Disclosures
Barron’s Top 1,200 Financial Advisors is based on assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work.
From Riches To Rags In Three Generations: Making Generational Wealth Checklist
When discussing multigenerational wealth it is common to come across proverbs that acknowledge the fact that generational wealth typically won’t make it past the third generation. In the United States the saying goes, “from shirtsleeves to shirtsleeves in three generations.” [i] In China it is said, “rags to rags in three generations.” [ii]
Generational wealth encompasses financial assets with a monetary value. These include investments, real estate, land, cash, collectibles, etc., that are passed from generation to generation.
Why does wealth seem to disappear within three generations? Several reasons include:
If you have concerns about assets being passed down, please view our checklist and determine where you stand.
Do you participate in effective gifting?
Using the annual gift exclusion and lifetime exemption is an effective strategy for passing on wealth to beneficiaries without being subject to significant tax responsibilities. The gift tax exclusion for 2023 is $17,000. That means both parents are allowed to give someone up to $17,000 per year ($34,000 per person), to as many people as they want. Should any of their gifts happen to exceed the gift exclusion limit, the amount in excess will go toward the lifetime exclusion amount which is currently $12.92 million in 2023. [iii]
Are you familiar with how trusts work to preserve generational wealth?
Trusts are legal entities that preserve wealth and allow the issuer of the trust to distribute the wealth as they see fit. They mitigate the risk of beneficiaries losing assets through lawsuits, divorce, or unexpected occurrences, and trusts also provide certain tax incentives. They can help you avoid probate, provide for a disabled beneficiary, establish a spousal trust, and other benefits. There are a variety of options to choose from and it is encouraged that you consult a financial professional to help you determine what works best for you and your family. Some of these trusts include:
Are you teaching financial skills to the children who will inherit your wealth?
It is critical to teach children the value of saving and how to invest. This can help to preserve the wealth they will one day inherit. It is a common theme that beneficiaries who inherit wealth will be tempted to spend it. However, this may stem from the fact that they don’t understand how to make the money work for them. Parents can educate their children and grandchildren on investing in financial instruments like stocks, bonds, CDs, annuities, and real estate interests. They can walk them through preparing a budget, provide them with financial literacy books, and even consider granting them a small sum of money to practice money management (while the parents monitors their progress).
Do you know how taxes affect generational wealth as it is passed down?
Depending on the amount of assets distributed to beneficiaries, and the manner in which they are passed down, the act of giving may trigger a gift tax. There are several methods of giving that can help to lessen the tax burden including:
Annual gifting
Lifetime gift exclusion
Charitable giving
Taking capital losses to offset capital gains
Deduct medical expenses that exceed 7.5% of your adjusted gross income
Tax credits can be more beneficial than tax deductions as they lower your tax bill dollar for dollar as opposed to reducing your taxable income, like the plug-in electric vehicle credit and residential energy efficient property credit [iv]
Do your beneficiaries understand the value of compounding wealth?
The earlier they begin investing money, the more beneficial the compounding interest will work on their behalf. The idea is long-term growth. To take full advantage of compounding wealth you have to be patient. A few common ways of investing where your interest compounds over time include:
Dividend stocks
High-yield savings accounts
Bonds and bond funds
Certificates of deposit (CDs)
Real estate investment trusts (REITs)
Simple interest annuities
It is highly encouraged that you enlist the help of a financial professional to learn which investments would be appropriate for you and your family’s generational wealth distribution goals.
Is there a family member you want to help with education expenses?
A popular way to transfer wealth is by paying for a family member or friend’s education. With this strategy, the tuition is paid directly to the institution, which permits the giver to be exempt from gift taxes. Money used for books, room and board, and other educational expenses is not tax exempt.
If the preservation of wealth over multiple generations is a plan that you are interested in exploring, consider consulting a financial professional who can help you design a strategy to pursue your financial goals.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
An increase in interest rates may cause the price of bonds and bond mutual funds to decline.
CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.
Non-traded Real Estate Investment Trusts (REITs) invest in commercial real estate or real estate related debt, but unlike exchange-traded REITs are not listed on a national securities exchange. Non-traded REITs differ from exchange-traded products with similar strategies, and can carry significant risk that should be understood prior to investing. Significant risks include, but are not limited to: sector concentration, geographic, illiquidity, interest rate, change in governmental, tax, real estate, and zoning laws, and debt. Alternative investments, including REITs, may not be suitable for all investors, and the strategies employed in the management of alternative investments may accelerate the velocity of potential loss.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
Footnotes
The Principles of Financial Literacy
Financial literacy refers to the skills and knowledge that allow an individual to make informed and effective decisions through their understanding of finances. Financial literacy starts by building a basic understanding of ‘money matters’ to create a sense of economic well-being, self-trust, and financial confidence. The principles of financial literacy include:
Saving
Saving is preparing for the future through actions such as:
Saving consistently into a savings account
Saving for large purchases
Increasing your retirement savings each time you get a raise
Having a fully-funded emergency fund with three to six months of living expenses saved
Managing Debt
Managing debt includes repaying and avoiding debt through actions such as:
Seeking out the lowest interest rates when borrowing
Paying off credit card balances each month
Consistently making on-time credit payments
Avoiding bankruptcy by working with a credit counselor when debt becomes overwhelming
Investing
Investing for the future helps prepare a financially secure retirement through actions such as:
Participating in your employer-sponsored retirement plan
Financial planning
Working with a financial professional
Having adequate insurance to preserve your ‘nest egg.’
Investing in after-tax strategies
Financial Literacy also includes having a basic understanding of how to pay bills online, manage bank accounts, manage debt, fill out income tax withholding forms at work, and other money-related actions. Where can individuals learn financial literacy?
Financial Literacy Through Licensed Professionals
A financial professional, Certified Public Accountant (CPA), or a financial literacy instructor can provide education on financial concepts to help increase financial literacy. Financial professionals should first educate to help individuals make informed decisions later.
Financial Literacy at Work
When employees can attend workplace classes on budgeting, saving, and investing, they are more likely to save for retirement and not live beyond their means. These classes are commonly conducted by the financial professional that oversees the company’s retirement plan, the HR Department, and other financial literacy educators.
Financial Literacy at School
Currently, 23 states require a financial literacy class to graduate from high school (2022 Survey of the States). Financial literacy experts know that teaching students how to manage their income and expenses and giving them a basic understanding of financial concepts will enable them to have financial success regardless of their future income.
Having trained teachers who know financial literacy content can help develop better credit behaviors early, even if offered through the school system, which leads to making on-time payments and understanding how to manage debt and credit.
Financial literacy through free resources- Look for free tools available to you through your bank or credit card company to help you monitor your spending and credit score. Also, check online for financial literacy apps through The Motley Fool’s Best Financial Literacy Apps for 2022.
Financial literacy affects all ages and all socioeconomic levels. It’s up to all of us to improve financial literacy here in the U.S. if we are to move away from being a debt-ridden society and toward being a society with financial security.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance.
LPL Tracking # 1-05259889
Spring Has Sprung: Time to Refresh Your Retirement Plan
Spring can be a fantastic time to refresh your retirement plan and savings habits. With 2023 bringing increased limits for 401(k)s, individual retirement accounts (IRAs), Health Savings Accounts (HSAs), and other tax-advantaged accounts, it’s worth taking a closer look at your retirement savings. Below, we discuss three ways to refresh your retirement plan this spring.
Maintain Consistent Savings
With inflation taking a bite out of just about everyone’s paychecks, it can sometimes be tempting to decrease the amount you’re contributing to retirement just to gain a bit of breathing room. However, maintaining a consistent rate of savings even through lean times can go a long way toward securing your financial future. When it comes to saving for retirement, time is on your side—and the more you can contribute at a younger age, the more time this money will have to grow.
If your savings rate has been at the same level for more than a few years, it may be time to revisit this contribution. You may discover that you can afford to set aside a little more; in other cases, it may make sense to switch from a tax-deferred account to a post-tax account like a Roth 401(k) or Roth IRA.
Review Your Asset Allocation
When it comes to investing for retirement through an employer plan, the options available to you may sometimes seem overwhelming. Far beyond mere “stocks vs. bonds,” employees are asked to choose from accounts ranging from growth to stability, domestic to international, and tech to blue chips. For some plans, the default option is to put contributions into a money market account rather than investing them in the stock market.
Does your asset allocation appropriately reflect your risk tolerance and investment timeline? It can be tough to know.
Fortunately, you don’t have to do it alone. A financial professional can work with you on your strategies and goals, making adjustments where necessary to keep you on the right path. Don’t wait until you get closer to retirement to realize you haven’t been investing as efficiently as you would have liked.
One last thing that is important to keep an eye on involves the disposition of your assets once you’ve passed away.
Many financial accounts like 401(k)s, IRAs, and even some bank accounts may require you to name a beneficiary. And for life insurance policies, the beneficiary is key—this is the person to whom the benefits pass, regardless what a marriage decree or executed will may say to the contrary.
If you’ve gotten married or divorced, had children recently, or if it’s been more than a year since you evaluated your beneficiary designations, it’s important to revisit each of your financial accounts to ensure your beneficiary designations continue to reflect your wishes. In many cases, a surviving family member has discovered too late that their loved one named an ex-spouse or estranged family member as their beneficiary, leaving those who depend on them in the lurch.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
An investment in the Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Asset allocation does not ensure a profit or protect against a loss.
This article was prepared by WriterAccess.
LPL Tracking # 1-05355828
Stepping Up to the Plate: Four Baseball Money Lessons
Baseball and financial management can have more in common than meets the eye. Below, we discuss four key lessons that investors—and everyone else—can learn from America’s favorite pastime.
Diversification of Assets is Critical
Having nine power-hitters who are weak in the outfield can help your team rack up high scores—but may not be enough to win the game. Just as you want your baseball team to include a good mix of a variety of skills and abilities, you should want your investment portfolio to include a diverse mix of stocks and more conservative assets, domestic and international assets, and tax-deferred and tax-advantaged accounts.
And like any good manager, it’s also important to have solid, identifiable expectations of the assets in your portfolio and to know when to cut certain “players” loose. Whether this means selling an asset once it hits a certain price or engaging in more complex strategies like tax loss harvesting, knowing when to call it a game can be the key between winning and losing.
You Need a Plan to Manage Losing Streaks
Few teams are able to consistently stay on top; even the best franchises have gone through tough times. And if the Chicago Cubs’ 107-season World Series drought is any indication, baseball can be full of some long down periods.1
Investors and baseball fans should be prepared for these down periods, no matter when they occur. Look back at historical statistics to reassure yourself that these events happen periodically, and with good planning and a bit of luck, winning seasons can come back. Having a plan to get yourself through these slumps can help investors and sports fans weather even the most discouraging times.
Try to Avoid One-Hit Wonders
Who doesn’t love to see a player blast a 500-foot home run, or watch a penny stock or crypto coin increase by over a thousand times in value nearly overnight? While these types of opportunities are fun to watch and present great feel-good stories, having a portfolio composed of power-hitters can also leave you vulnerable to major fluctuations in value.
All investments have some degree of risk, but it’s important for these risks to be compensated—in other words, investments that have a likelihood of increasing in value that corresponds to their risk, not those that will depend on overcoming the slimmest of odds to create a small group of lottery winners.
Take Advantage of the Seventh-Inning Stretch
The seventh-inning stretch gives fans an opportunity to get a brief change of scenery to focus on the last couple of innings of the game. Investing for years without setting aside time to evaluate your asset allocation, your tax reduction strategies, and your retirement plans can leave you scrambling once it’s time to make decisions about your future. Give yourself a virtual “seventh inning stretch” by stepping back and taking a holistic look at your finances so that you can buckle down with renewed focus.
With a solid game plan and prudent evaluation of risk, you’re ready to get started!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking # 1-05355833.
Footnotes:
1. https://www.nbcsports.com/chicago/chicago-cubs/joy-world-cubs-finally-end-108-year-series-drought
A Refresh for Your Finances
When spring rolls around, your thoughts might turn to organizing your closets or giving your floors a good deep clean. But how much thought have you given to cleaning up your finances? If the answer is “not much,” you might want to reconsider.
Spring is a great in-between time of year to take stock of your financial health and to create goals for the rest of the year—or to plan for the years ahead.
But before you dive headfirst into any new financial plan, you need to take a look at the current state of your finances. Are they where you want them to be? Have you had trouble putting enough away to account for the unexpected? The steps below can help you get started.
Step 1: Write it all down.
A coffee here, a new pair of shoes there; when you go about your life as usual, you don’t typically think about how much you’re spending. But even small purchases on a frequent basis can add up. Take a month to jot down or create a digital spreadsheet of all your expenses, including mortgage or rent payments, utility bills, groceries, subscription services, and miscellaneous expenditures. When you are able to see a month’s worth of spending in front of you, it becomes easier to determine which are necessary and which areas you can cut back on.
Step 2: Establish a budget.
Once you have an estimate of how much you are spending each month, set up a budget that fits your lifestyle and goals. You can break your budget into areas such as housing and utilities, food and personal care items, childcare, memberships, and miscellaneous. If you’ve tried budgeting in the past to no avail, start small. You don’t have to create a budget for all areas of your life at one time. Try setting up a budget for just one or two areas. Perhaps you want to spend less on subscriptions and memberships that you don’t use. A $30 gym membership might not sound like a lot of money to shell out each month, but that adds up to $360 a year! Be realistic about how much you are willing to spend on nonessentials, and consider looking for less expensive alternatives.
Step 3: Evaluate and pay down.
Credit is a necessary evil, but it doesn’t have to be nearly as big a headache as it is made out to be. Of course, some credit is good. Showcasing your ability to make timely payments to creditors is imperative for everything from buying a house to starting a business, but it’s easy to get in over your head. If you have multiple lines of credit, look carefully at the interest rates and amount borrowed on each. Start by paying down the cards with the highest amount of interest, which can quickly accrue and leave you even more in the hole.
Be realistic with your time frame for paying off debt. If you attempt to bite off more than you can chew, you can end up in worse shape than when you began. Do some research into your credit companies’ policies and see if they will work with you toward a lower interest rate or a reasonable payment plan. Once you’ve made progress in paying off any outstanding balances, make sure you remain in the black by setting up limits for yourself. Compare your credit limit, which is oftentimes far higher than what you can reasonably afford to pay off each month, with your monthly income and make sure you do not break the threshold you establish. If this sounds easier said than done, try to leave your credit cards at home unless you absolutely need them, or use them for smaller purchases that you can pay off more easily.
Take Advantage of Apps
There truly is an app for everything these days, including managing your finances. While apps cannot replace the expertise of a professional, they are a great way to plan, budget, and keep track of your savings on daily, weekly, and monthly bases.
If you’re tired of having to look through multiple accounts to keep track of your spending, the Mint app is perfect for you. The app logs everything: the total amount of money you have across all your accounts, your credit score, and debt. Its calendar function can show you when your bills are due and how much you owe, and lets you check off payments once they’re made. The best part? Mint is totally free.
Visual learners, look no further than Spendee for your financial-planning needs. This app provides a visual breakdown of your spending, allowing you to more easily see the areas you might want to cut back on. It connects to your bank account to provide a list view of your payments, and it can even show the average of your expenses as well as the day of the week you tend to spend the most.
Whether you want to save a few extra dollars each month or plan for a life-changing purchase like a new home, a little cleanup of your finances can go a long way. Just be sure to consult a professional for your specific financial needs.
This article was prepared by ReminderMedia.
An Update from the GWS Investment Committee: Bank Failures Raise Market Distress
Stock and bond market activity was materially shaken last week as Silicon Valley Bank (SVB), the California bank subsidiary of SVB Financial Group (SIVB), fell into FDIC receivership. SVB is the first FDIC-insured institution to fail since 2020 and the largest by assets since Washington Mutual failed in 2008. The news has caused market participants to speculate if another shoe is to drop.
Many market participants are focusing in on SVB’s losses in its securities portfolio as a key cause for its demise, and participants are also tying the bank’s fall to the Federal Reserve’s (Fed) rising rate policies. We believe Fed policies were only partially to blame, as SVB’s niche customer base and lack of earning asset diversification (i.e. an unusually large portfolio of marketable securities relative to assets) also contributed to the bank’s failure.
Meanwhile, late Sunday, regulators closed Signature Bank (SBNY), an FDIC-insured New York state commercial bank with total assets of $110 billion. The institution fell victim to excess crypto-related deposits and was also experiencing material deposit outflows (-16.5% year-over-year).
At this time, we do not believe the SVB and SBNY bank failures are a deeper sign of things to come. However, we are paying close attention to ongoing developments in the banking sector and in other industries for hints of any widespread contagion. Indeed, more banks may come under distress (72 FDIC-insured banks have failed over the last 10 years), but we are not expecting SVB and SBNY to be the first steps on the way to a systemic crisis if the Federal Reserve, Treasury, and FDIC use their tools early to protect the system. LPL Research’s quantitative analysis of banks and savings and loan institutions in the Russell 3000 Index (see below) points to distinctive operating aspects of SVB that we believe contributed to its downfall. Unique exposures at SBNY (crypto) likely caused that institution to also suffer a lack of diversification in its depositor base.
Also on Sunday, regulators, including the U.S. Treasury Department, the Fed, and the Federal Deposit Insurance Corporation, indicated that all depositors of SVB and SBNY will be made whole. Meanwhile, we anticipate regulators will take emergency measures Monday and/or this week to help backstop the banking system and reinstall depositor confidence.
SVB Financial Group (SIVB) Background
SIVB is a bank holding company that serves emerging growth and middle-market growth companies in targeted niches, focusing on the technology and life-sciences industries. The company’s operations include a limited international presence, a U.S. wealth unit, a commercial bank, an investment bank, and a fund manager. Prior to the current distress, the bank (SVB) held $212 billion in assets and $175 billion in deposits.
SVB’s unique combination of bank depositors (individuals and institutions exposed to weakness in venture/start-up valuations) and degradation to its asset portfolio caused the institution to become troubled when faced with unusually large depositor withdrawals. The large amount of withdrawals, driven in part by SVB’s customer exposure to distress in the venture capital industry and its lack of stickier retail deposits, caused SIVB to sell marketable assets at losses to cover those withdrawals. This added further stress to its balance sheet as more fixed income securities were marked to market at much lower valuations. The news flow about SVB’s position intensified the withdrawal outflow, which ultimately resulted in the FDIC stepping in.
Signature Bank (SBNY) Background
Signature Bank is a full service commercial bank that serves privately-owned business clients and their owners and senior managers. The bank provides a line of personal banking products and services along with investment, brokerage, asset management, and insurance products.
The “House View”
At the time of this writing, we are hearing that Fed officials are contemplating several measures to attempt to ensure stability in the banking system. Any such developments will likely be viewed as a positive by the market. However, we are also anticipating that depositors at smaller banks may become uneasy and may seek to withdraw funds. Reuters has reported of such an occurrence at a First Republic Bank in California (ticker: FRC). The risk of this type of sentiment activity, as well as the late-Sunday news on Signature Bank, causes us to operate with tactical caution at this juncture, particularly when it comes to bank stocks.
Bank Industry Analysis Re: SVB Financial Group (SIVB)
To gather insight into the potential systemic risk posed by the SVB failure, LPL Research conducted quantitative analysis of the 241 publicly-traded banks and savings and loan institutions in the Russell 3000 Index. LPL analyzed each company’s deposits, deposit rate of growth, unrealized losses, total assets, marketable securities position, capital ratios, and marketable security positions relative to various balance sheet variables. Our findings were:
SVB Financial Group (SIVB) was the 14th largest institution by assets ($212 billion) as of December 31, 2022.
Of all the banks in our studied universe, SVB Financial Group had far more marketable securities relative to total assets, total deposits, and earning assets: 55.4%, 67.4%, and 60.4%. The average for the banks with over $25 billion in assets was 22.2%, 29.5%, and 25.3%. This means SIVB was running a balance sheet relatively more prone to changes in market prices than its counterparts and thus was more exposed to price pressure in the bond market.
SIVB’s deposit growth over the last year (-8.5%) was materially worse than the universe of banks with over $25 billion in assets (+5.6%). The lack of asset diversification made it uniquely difficult for SIVB to manage against high withdrawal flows.
The niche nature of SIVB’s clientele, coupled with the firm’s balance sheet mismanagement, were distinctive contributors to the bank’s downfall, in our view. While other banking institutions need to be scrutinized for their specific business exposure, we do believe broader asset diversification among many banks we have analyzed can alleviate the risk of another high-profile bank failure.
Citation(s)
Important Disclosures
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data from Bloomberg.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
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Luck of the Investor: Making Your Own Luck on St. Patrick’s Day
As Samuel Goldwyn once said, “The harder I work…the luckier I get!” 1 But when it comes to investing, luck may play a huge role in outcomes—no matter how hard you work.2 Below, we discuss some ways that luck may impact your investing, as well as some steps you may wish to take to try to make your own good luck this St. Patrick’s Day.
The Impact of Luck on Investment Returns
One reason so many financial professionals advise against market timing for long-term investors involves the distribution of days with major gains and days with major losses. Historically, and particularly seen during the earliest days of the COVID-19 pandemic, some of the market’s best days were followed by some of its worst, and vice versa.3
Trying to sell at the top and buy at the bottom may require a great deal of luck. You may need to trust that a day with a 2 or 3 percent loss may not be immediately followed by a day with a 2 or 3 percent gain. However, over the course of a long investing horizon, these single-digit gains and dips aren’t likely to have a major impact unless you make a habit of buying and selling during volatile periods.
Focus On Process, Not Prior Results
How can you take advantage of good luck and avoid the impact of bad luck when choosing your investments? The answer may be complicated and may depend on your personal circumstances. However, by focusing on the investment process—rather than chasing returns by buying into funds that have recently had a good run—you may be more likely to pick a future winner.
Having a solid process may increase your probability of investment success over time. With your financial professional, consider focusing on these three steps:
Discuss your financial professional’s analytical process. How does your financial professional choose funds? How does he or she know whether it’s time to dump underperforming funds or stick around for a future rally? By having some insight into the process your financial professional uses to choose their investments, you may determine whether this approach fits your risk tolerance and desired asset allocation.
Ask whether this process is designed to manage and mitigate some of the behavioral biases that may send investments off-course. Some of these biases include overconfidence, sunk cost fallacy, and anchoring of sources. Ensure that your financial professional is reading and absorbing information from a variety of solid sources.
Once an investment or set of investments has been chosen, evaluate it with an eye toward its end user. Is this investment intended to provide high commissions that enrich the investment company more than the shareholders? Or does it provide an excess return that more than accounts for its fees? Compare the investments to their benchmarks to see how they’ve performed over the years.
Sifting through which successes are attributable to luck and which to skill may be tricky. But by firming up your investment selection process, you may improve your luck and increase your likelihood of success.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Asset allocation does not ensure a profit or protect against a loss.
Past performance is no guarantee of future results.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess
LPL Tracking # 1-05233581
Understanding Your Credit Situation at Your Current Stage in Life
Credit is a crucial component of your financial health and well-being. Without proper credit, it might be difficult, if not impossible to obtain the things you need throughout your life, such as a place to live, or a vehicle to drive. Throughout your life, you will be in different credit situations and your credit will be important for different reasons. To know what you need to do to get your credit where it needs to be, it is important to understand what your credit situation is likely to be at your specific stage in life.
Millennials
For millennials, the current goal is establishing and building a credit history. Those on the younger end of this generation may be experiencing their first taste of credit which often comes in the form of credit cards or student loans. The downside for this generation is that they have little credit history. This means even if the credit history they have is good, the lack of time and number of accounts may still lead to a lower score. The goal for credit during this stage in life should be to build it up enough to be able to qualify for home and car loans when the time for purchase arises. To do this, you will need to establish credit as soon as possible, always make payments on time, keep the overall debt amount low, and keep balances to limits low. It is also advisable to diversify credit as well between long-term debt like a student loan and revolving debt with a credit card.
Gen Xers
While Gen Xers have their credit significantly more established by this point in their lives, they are likely to rely on a good credit score the most. At this stage in life, you should be fine-tuning your credit, pushing it from fair to good or excellent. This jump in credit means significant savings when it comes to major purchases, paying down debt, or refinancing a home to get the lowest rates. The credit strategy at this point should be lowering the ratio of debt to open credit to 30% or less, continuing to pay bills on time, and making sure to avoid any blemishes on your credit record. Not only will having a higher credit score provide you with the freedom to make the purchase you want, but will also provide you with the greatest savings on interest.
Baby Boomers
When you see those significantly high credit scores, most often they belong to Baby Boomers. It is a reward for those who have spent many years paying their bills on time, managing their debts, and diversifying their accounts. What’s interesting about credit with this generation, is that high debt does not necessarily lead to a lower credit score. Whether it is due to the fact that Boomers have so many other positive factors with their credit, or they have higher credit limits making the ratio lower, it seems that having a larger amount of debt at this age is not as penalized. But that doesn’t mean that you should stop trying to maintain that good standing. A good credit score may help you to obtain the things you desire for your retirement. Continue to make timely payments and while it is ok to add debt, make sure that you have the income to stay on top of it and keep the ratio of debt to limits low.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Sources
https://www.marketwatch.com/story/almost-half-of-millennials-say-that-their-credit-scores-are-holding-them-back-2018-07-16
https://www.credit.com/credit-reports/how-credit-impacts-your-day-to-day-life/
https://www.businessinsider.com/how-your-credit-score-can-impact-your-life-2016-5
https://www.experian.com/blogs/ask-experian/research/how-baby-boomers-have-top-credit-scores-and-tons-of-debt/#:~:text=When%20it%20comes%20to%20credit,points%20higher%20than%20Gen%20Xers.&text=%22If%20debt%20is%20being%20well,not%20tank%20your%20credit%20scores.%22
Content Provider: WriterAccess
Tax Prep Checklist: Everything You Need to Be Ready for Tax Season
Regardless of whether you prepare your taxes yourself or use a professional’s services, it’s a good idea to gather the information and documentation you need well in advance of your actual tax filing date. Below, we’ve listed some key information you need when preparing this year’s taxes.
Your Personal Information
The personal information you may need to file taxes may contain information from your prior year’s return, including:
Your Social Security Number (SSN), along with SSNs for your spouse, if applicable, and any dependents
Last year’s Adjusted Gross Income (AGI) if you’re e-filing your taxes and need to confirm your identity
Any tax filing PIN you may have.
Your Income Information
Your tax return typically requires documentation for all the taxable income you received the previous year.
Your Deduction Information
Next, gather information on deductions that help reduce your overall tax burden. These include, but aren’t necessarily limited to:
IRA and other retirement contributions
Medical bills
Property taxes
Mortgage interest
Educational expenses like college tuition or student loan payments
State and local income taxes or sales taxes
Charitable donations
Dependent care expenses
Classroom expenses (for teachers)
There are other state-specific deductions that may apply to your situation.
Your Tax Credit Information
Credits may further decrease your tax burden. Unlike deductions, which may lower your taxable income, tax credits simply credit you a portion of what you’d otherwise owe. Some available tax credits may include:
Often, the information needed to receive these tax credits may be duplicative of other tax information. For example, having your retirement contribution records handy may support both an IRA deduction and the Saver’s Credit (if you qualify). Having your child’s SSN may allow you to fill out the Child Tax Credit section and the dependent care deduction. The more income- and deduction-related information you have in one spot, the more streamlined your tax prep process should be.
Your Tax Payment Information
Finally, gather and provide information on how much you’ve already paid in taxes, whether through estimated tax payments, income withholdings, or both. This helps you quickly calculate your total amount due once you’ve entered your income, deduction, credit, and withholding information.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice.
We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking # 1-05206790
Source:
Four Actions to Take if You’re Retiring Next Year
Retirement is a major transition point – as you go from saver to spender
It’s common for people who are retiring to set their retirement date in either the springtime or the early summer. If you happen to be one of those lucky folks who are going to retire this year, then “Congratulations!”
But before you start planning your retirement party, make sure you do these four things if you’re retiring next year.
Don’t Leave Money on the Table.
As part of your employment, you may be entitled to “matching” and/or “profit-sharing” contributions from your employer to your 401(k) or other retirement plan. Since you typically need to be actively employed on the date the payment occurs to receive these funds, make sure you understand these terms prior to setting your final work date. You don’t want to miss out on “free” money!
For personal contributions, you may want to increase your contribution percentage to help you reach your annual maximum. Many employers cap the amount you can contribute to your plan from each paycheck. Since you may not be able to increase your contribution rate to 100% for your last couple of paychecks, you may need to instead increase your contribution percentage long before you retire to max out.
Your pension benefits are calculated based upon your earnings history. Consequently, you will want to align your retirement date with the timing of your annual compensation adjustment, because retiring before that date could cause you to miss out on including another year of higher compensation in your pension calculation.
On a similar note, it’s important to understand the timing and eligibility requirements for any bonus payments you may receive. Most people are required to be gainfully employed at the time the bonus is paid in order to receive it. If you do happen to leave before this date, you may be able to negotiate benefits as part of your retirement agreement.
Unused vacation days are typically paid out as part of your final paycheck. This can be a problem when you have an exceptionally large amount of time off, as the large lump sum could push you into a higher tax bracket. If you are planning to retire near the end of the year, take vacation time when you planned to retire, which may enable you to push a hunk of your remaining “vacation wages” into the next year and help minimize the ripple effect from a large, one-time payment.
Refresh Your Risk Profile.
Retirement is a major turning point in your life. It’s not just the transition from full-time work to either part-time or no work at all. It’s also the transition from saver to spender, where you face the reality of spending down your retirement nest egg.
In addition, your asset allocation may be more heavily weighted in stocks than you initially intended. Rebalancing your investments is a good idea during your working years, but it’s even more critical to keep things in balance once you retire. Since you’ll be drawing down your savings to finance your retirement, having too much of your portfolio in riskier assets like stocks leaves you vulnerable to a potential market downturn.
Before you rebalance, keep in mind that you may incur tax liabilities and/or transaction costs, and rebalancing does not assure a profit or protect against a loss.
Avoid Underpaying Your Taxes.
When you’re working, your employer automatically withholds taxes from your paycheck unless you opt out to reduce (or increase) this amount. In retirement, the opposite is true. By default, taxes are not withheld on your retirement income. Instead, you must opt in to have taxes withheld from your Social Security benefits, pension benefits and IRA/401(k) distributions. If you don’t have taxes withheld, estimated tax payments (federal and state) will likely become a necessary part of your life.
Imagine you and your spouse are planning on having $150K in retirement income ($50K of Social Security benefits, $25K of pension benefits and $75K of traditional IRA distributions). For federal taxes, you’ll need to pay about $5,500 every quarter ($22K annually) in estimated tax payments. Failing to do so will leave you with approximately $500 in underpayment penalties.
Opting in to have taxes withheld from your retirement income will help you dodge penalties from late payment on taxes and avoid the uncomfortable feeling of writing large checks to the IRS.
Talk With Your Spouse.
It’s worthwhile to have a good idea of how you’re going to spend your newfound free time in retirement. Many will give a “deer in the headlights look” when asked what an ideal day in retirement looks like both today and a year from now (after the initial retirement buzz disappears). They were unprepared for the prospect of converting 40+ hours “in the office” into 40+ hours of meaningful activity.
At the same time, they also lacked a plan for spending time with their spouse. After all, one or both of you have regularly worked for the past several decades. Retirement creates a brand new dynamic that removes the element of scheduled separation. Instead, you’re going to be stuck (blissfully) with each other. How will you spend that time? Volunteering? Working around the home? Traveling abroad?
Creating a plan for staying busy that both you and your spouse agree on will help ensure that your golden years are sweet, not bittersweet.
The Bottom Line
Taking the plunge into retirement is a monumental milestone. It’s important that you’re ready for it. Ask yourself and/or your financial professional the following questions to help you evaluate your retirement readiness:
Navigating your retirement journey requires that you and your financial professional have confident answers to these questions. If you lack clarity, seek professional guidance that can help you determine if you are on track with your financial plan and the pursuit of your long-term goals.
Important Disclosures
This material was created for educational and informational purposes only and is not intended as ERISA or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Asset allocation does not ensure a profit or protect against a loss.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
This article was prepared by FMeX.
3 Practical Time Management Tips for Investors
For many, spending more quality time with loved ones and friends is a New Year’s resolution or work-life balance goal. But for investors who are accustomed to keeping a close eye on their assets’ performance, balancing one’s “to do” list with one’s “want to do” list may be tricky. Below, we discuss three time management tips investors may employ to free up some extra time for what matters most.
Why Time Management Matters
Adopting time management skills may do two things. First, it may allow you to become more efficient, letting you accomplish more tasks in the same amount of time. But for many, doing more may not be a key part of the equation. For these people, time management may allow them to do the same tasks in far less time—freeing up time for other pursuits.
Whatever your goals, time management helps you streamline and prioritize tasks to make every minute count.
Delegate
It may be far more time-consuming to teach others to do certain tasks than to simply do them yourself. But as your to-do list grows longer, delegation often becomes necessary. By assigning certain tasks to others—whether a tricky work report or a weekly grocery delivery—you may be able to put more time and energy into the tasks that are tough or impossible to delegate.
Automate
If you find much of your working time is spent on the same tasks, it may be worth investigating ways to automate them. You may be able to write a simple algorithm or macro that reduces the time spent on these items. Setting up calendar reminders or scheduling weekly meetings with your team may also help reduce your mental load while ensuring that nothing falls between the cracks.
Prioritize
When there are multiple projects and tasks competing for your attention, it may be tempting to put out the fires first—but often, doing this means that the plan for your day goes by the wayside. You’re then forced to put today’s tasks off until tomorrow, setting you further back on tomorrow’s to-do list. Instead, by designating certain times of day for certain tasks, you’ll be better able to optimize your time and prioritize what needs to be accomplished.
At the same time, don’t let yourself become overly controlled by a rigid to-do list. If a last-minute emergency pops up, it may be counterproductive to let it fester while you work your way through less time-sensitive tasks. Above all, flexibility—albeit structured flexibility—may be one of the keys to more efficient time management.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was prepared by WriterAccess.
