Tag: investing

Working In Retirement? Here’s 3 Reasons Why You Should

It might sound a little crazy but there are many benefits to working even though you no longer need the money for your living or retirement needs.

These “retirement workers” have discovered that part-time jobs or volunteer positions allow them to keep a nice pace in life and find a balance among using their talents, enjoying recreation, traveling, and spending time with family. Some of our most ambitious clients even start brand new companies in retirement.

Here are three important benefits of working in retirement that might persuade you to clock back in a couple days every week.

Working is good for you.

Retiring early is a very popular goal right now. But while it makes sense to want to enjoy your assets when you’re younger, a recent study links retirement with decreased mental and physical activity and higher instances of illness.

Working keeps your mind and body active. It makes you engage in problem solving and creative thinking. It keeps you mindful about your health and appearance so that you make a good impression on colleagues and customers. It challenges you to keep achieving and rewards you when you do.

And, if nothing else, it keeps you from vegging out on the couch all day and driving your spouse crazy!

Work can give you a sense of purpose.

Many retirees struggle with the transition to retirement because their sense of purpose and identity is so tied to their work. Without that familiar job and its schedule and responsibilities, some retirees struggle to find a reason to get out of bed in the morning. A part-time job can restore some of that sense of structure and drive.

In fact, you might find that working in retirement gives you an even greater sense of purpose than your former career did. You might have worked a job you didn’t 100% love in order to support your family. Now that you no longer need to worry about that, you can take that community college teaching position. You can work a couple days every week at that non-profit that’s making a difference in your community. You can set up regular volunteer hours at a charitable organization that’s close to your heart. You can feel like you’re making a contribution to society without worrying about the size of your paycheck.

Work can improve your connections to other people.

Early retirement can be a period of isolation for some folks. Your friends and family might still be busy working and raising children. The familiar social interactions you enjoyed at work are gone. You and your spouse probably share some common interests, but you can’t spend every single second together.

It’s important for retirees to be open to making new personal connections in retirement. A new workplace is a great place to start that process. You’ll meet new people from different walks of life. You’ll work with and help people who can benefit from your personal wisdom and your professional skill set. You might meet other retired seniors who, like you, are trying to stay active and put their talents to good use. And the more involved you are in your community, the more curious and adventurous you’re going to be about trying new restaurants, shopping in new stores, and interacting with more people.

Of course, working in retirement can affect other aspects of your financial planning even if you don’t need the money, such as taxes, withdrawal rates, and your relationship with your spouse. If you’re considering a new part-time job, let’s schedule a conversation to discuss any adjustments we should be thinking about so that you get the best life possible with the extra bit of money you’ll soon have.

For more on working in retirement, check out this cool article from Nerd Wallet that gives you a few things to consider.

The Longevity Effect

Longevity can be both a gift, and a curse. This generation of retirees is going to live longer than any in history. Today’s seniors are healthier, more active, and receiving better preventative care. And on top of that, a growing group of scientists is trying to harness technology and modern medicine to slow down the aging process.

Experts call the cumulative effect of these changes to life expectancy “the longevity effect.” They project that extending our years of healthy living can have tremendous benefits both to individuals and to society as a whole.

Let’s look at some of the cutting-edge advances in slowing biological aging, as well as what experts recommend folks can do right now to stay more than just young at heart.

Genetic Testing

You’ve probably seen products like AncestryDNA that can give you a robust genealogical profile from your saliva. Scientists are continuing to progress on more sophisticated versions of this technology that will be able to use your genes to test for serious diseases. There’s even hope of being able to test for genes that are associated with longevity, and others that could eventually shorten your lifespan.

We all know that the best medicine is preventative. But if scientists can perfect this “road map” for life expectancy, the implications for your financial planning could be enormous. An accurate longevity expectancy could make it much easier to plan ahead for significant medical expenses that might not be covered by Medicare. And if you had a better idea of when you were likely to start “slowing down” later in your retirement, you might enjoy your early retirement years more and worry less about running out of money.

Fighting “Zombie Cells”

The cells in our bodies are constantly dividing. After a certain number of divisions, cells usually die. Those that don’t – so-called “zombie cells” – can build up in our bodies over time and interfere with how our healthy cells operate.

Scientists are looking for ways to clear out zombie cells via “interventions” such as pills. Clear out the zombies, and you’re eliminating cellular environments ripe for things like cancer, cardiovascular disease, Alzheimer’s, and osteoporosis. The more resistant we are to these kinds of diseases, the greater our longevity will be. And the longer you live without having to cope with a debilitating disease, the longer you’ll be able to work part-time, volunteer, play your favorite sports, and vacation with your favorite people.

In the Meantime

There’s no guarantee that these specific medicines and technologies will be ready for the general public during your retirement. But it is safe to assume that advances both gradual and rapid will continue to improve the quality of your health care.

The most important thing you can do to keep aging in check during retirement is to take advantage of the services Medicare provides right now. That starts with your free “Welcome to Medicare” visit, which will help you and your doctors get a baseline reading of your health upon retirement. Medicare also covers many vaccinations, a wide variety of preventative screenings and tests, an annual wellness checkup, and a depression screening if you’re struggling with the emotional transition into retirement.

These services might not sound as exciting as fighting zombie cells, but they’re the most effective ways to detect significant health problems while it’s still early enough to do something about them.

So while we’re all waiting for the next big medical breakthroughs, old fashioned common sense will go a long way towards a long and healthy retirement. Go to the doctor. Eat well. Exercise. Wear sunscreen. Pursue your passions with a vigor that will keep your body and mind energized.

And any time you want to review how your financial plan will take care of you at every phase of your retirement, don’t hesitate to call us up.

Source:

Will We Soon Be Taking a Pill to Slow Aging?

We also have some great return on life resources over at our website, so make sure to click here and check that out.

Increase Your Generosity Without Jeopardizing Your Retirement

How are you going to get the best, most fulfilling life possible with the money you have once you retire? Generosity is key, but it can be costly.

Study after study has shown that retirees who spend their time and money on experiences are much happier than those who just buy stuff. Charitable giving can be a particularly meaningful way to keep yourself active and put your assets to good use. Too much generosity can be costly, so it’s important you follow these steps.

Just as long as you don’t overdo it.

If you’re feeling an increased desire to give back now that you’ve retired, here are some tips on balancing your good intentions with what’s best for you and your family.

1. Do your homework.

Recently, there have been high-profile cases of fraud and misappropriated funds at some very famous charitable organizations. But even if you’re giving to a charity that is run well, you should understand where your money is really going. If you’re happy with your dollars helping a larger organization to pay its bills and employees, great. If you want your money to have a more immediate impact on those in need, consider giving to smaller organizations in your community.

Do some googling and check online watchdog databases to make sure your favored charity is on the up-and-up. And unless you know the organizers personally, avoid online crowd-funding campaigns that aren’t legally accountable for how they use donations.

2. Consider a volunteer position.

Your favorite non-profit or charitable organizations need money. But they also need manpower.

If you’re thinking about working part time in retirement and a paycheck isn’t really important to you, schedule regular volunteer hours instead. You’ll get all the same benefits of having a job: structure, responsibility, camaraderie. Plus, seniors who volunteer report lower levels of stress, an increased sense of purpose, and better physical and emotional health.

3. Teach, tutor, or consult.

When looking for a charitable outlet, don’t overlook the professional skills that you honed over your career.

You might not have the qualifications to teach at a school or university, but you could talk to your local community center about holding a seminar that could benefit your neighborhood. You might be done balancing your company’s books, but there are high school kids who could benefit from your mastery of math. Open your door to local small business owners or recent college graduates who need an entrepreneurial mentor.  

4. Make a plan.

It’s a scientific fact that giving makes us feel good. But some seniors may get too caught up in their generosity. They forget that gifts and donations are coming from that same pool of assets that are supposed to keep them safe and secure for the rest of their lives. They may have trouble setting limits and saying no.

There is indeed such a thing as too much giving. You might not think much about writing an extra check or two early in retirement. But seniors have to maintain a long-term perspective on their nest eggs. This generation of retirees is going to live longer, more active lives than any in history. You need to make sure that helping someone today isn’t going to make it harder to cover your health care and cost of living needs tomorrow.

So, if you and your spouse want to make regular charitable donations, it’s important that you come in and talk to us. We can incorporate giving into your monthly budget and retirement income plan. If you want to make your generosity more permanent, we can also help you establish a charitable trust and add sustained giving to your estate plan.

We’re always happy when our clients want to help others. But it’s our responsibility to make sure your financial plan covers your best interests first. Let’s work together on a plan that will make your retirement secure and the world around you a little brighter.

For more on topics like this, we are doing some really cool stuff with our podcast. Check it out.

3 Ways to Know When You Are Ready to Retire

3 Ways to Know When You Are Ready to Retire

Mike Desepoli, Heritage

There’s a pretty good chance that your parents and grandparents retired just because they turned 65. Today’s retirement is a bit more complicated than that. While age is still an important factor, your ability to connect your financial resources to your lifestyle goals is what will truly determine if you’re ready to retire.

Here are three important markers to cross before you crack open your nest egg:

  1. You’re financially ready.

The most common question we field from our clients is, “How much do I need to retire?” While there’s no magic number to hit, a few key checkpoints are:

  • You have a budget. Many clients who are preparing to retire tell us they’ve never kept a budget before. Time to start! If you have any big plans for early in your retirement, like remodeling your home or a dream vacation, let us know so we can discuss front-loading your annual withdrawal rate.
  • Your debts are paid. No, you don’t necessarily need to pay off a fixed-rate mortgage before you retire. But try to reduce or eliminate credit card balances and any other loans that are charging you interest.
  • Your age, retirement accounts, and Social Security plan are all in-sync. If you’re planning on retiring early, be sure that your retirement accounts won’t charge you any early withdrawal penalties for which you’re not prepared. Also keep in mind that the earlier you take Social Security the smaller your payments will be. Can you afford to live without Social Security until age 70 to maximize your benefits?
  • You and your spouse have a health care plan. Medicare insures individuals, not families. If only the retiree is 65, the younger spouse will need to buy health care elsewhere.
  1. You’re emotionally ready.

We spend so much of our lives working that our jobs become a large part of our identities. Rediscovering who we are once we stop working can be a major retirement challenge. To prepare for this emotional transition:

  • Talk to your spouse ahead of time. Don’t wait until your last day of work to discuss how both of you feel about retirement. What do each of you imagine life will be like? What are the things you’re excited to do? What are you afraid of? What can each of you do to make this new phase of life as fulfilling as possible?
  • Make a list. What are the things you’re passionate about? Something you’ve always wished you knew more about? A skill you’d like to develop? A cause that’s important to you? An ambitious business idea that was too ambitious for your former employer?
  • Check that your estate plan is in order. It’s understandable that many people avoid this part of their retirement planning. But putting together a legacy that could impact your family and community for generations can have tremendous emotional benefits. The peace of mind that comes from knowing the people you care about are taken care of can empower you to worry a little less and enjoy your retirement more.
  1. You’re ready to do new things.

Ideally, the financial piece of this conversation should make you feel free enough to create a new retirement schedule based on the emotional piece. Plan your days around the people and passions that get you out of bed in the morning. Some ideas:

  • Work at something you love. Take a part-time job at a company that interests you. Turn that crazy idea you couldn’t sell to your old boss into your own business. Consult. Teach. Volunteer.
  • Keep learning. Brush up your high school French by enrolling in an online course. Learn some basic web design so you can showcase your photography portfolio or create an online store for your crafts. Sign up for cooking classes and get some new meals in your weekly rotation.
  • Get better at having fun. What’s the best way to lower your handicap or perfect your backhand? Take lessons from a pro. The second best? Organize weekly games with friends and family.
  • Travel. Planning out a big vacation can be a fun project for couples to do to together. And while you’re looking forward to that dream trip, take a few weekend jaunts out of town. Stay at the new bed and breakfast you keep hearing about. Visit your grandkids. Go on the road with a favorite sports team and enjoy the local flavor in a different city.
If you’re nearing retirement and struggling with these issues, working through the Return on Life tools with us might provide some clarity. Let’s discuss how we can help get you ready for the best retirement possible with the money you have.  

 

For more retirement resources visit the AARP website.

Empower Yourself by Recognizing Your Freedom to Choose

Empower Yourself by Recognizing Your Freedom to Choose

By Mike Desepoli, Heritage

“When we are no longer able to change a situation, we are challenged to change ourselves.”
Viktor Frankl

We may not always be able to control the circumstances of a given situation we find ourselves in. But we always have the freedom to choose how we respond. The choice we make – and how we make it – often determines how well we survive the situation, and if we go on to thrive.

If challenges in your family life, your career, or your finances are making you feel powerless, try approaching the challenge from a new angle. This simple three-step process can put you back in touch with your freedom to choose how and why you live your life.

  1. Consider your reaction.

Step back from the problem. Take a breath. Take a walk. Pour yourself a cup of coffee.

By creating some space, you’ll be able to ask yourself, “Why am I reacting the way that I’m reacting? Is there a better perspective I could be taking? Am I letting past experiences influence my reaction for better? For worse?”

When we feel overwhelmed by a challenge, we often fall back on established patterns in our thinking. Often these default reactions are negative. If we’re arguing with our spouse, we might replay past arguments in the back of our heads. Financial difficulty might trigger memories of our parents struggling with money as we were growing up.

Identifying the negative experiences and perspectives that create our immediate reactions to challenges can help us find ways to create more positive and empowering reactions.

  1. Consider your purpose.

Instead of allowing the situation to dictate how you’re responding, push back. Refocus how you choose to respond around the goal that you are trying to accomplish.

For example, if your business partner backs out of the new company you’ve been planning to start, that loss of manpower and capital could make you feel defeated and powerless. But the reality is that you are choosing to dwell on negatives that you can’t control.

So, what can you control?

If you’re really committed to starting your new company, you can choose instead to focus on alternative funding sources. You can reach out to other friends, family, and colleagues about potential partnerships. You can choose to work on Plan B.

Another example is the investor who feels powerless as market volatility chips away at his nest egg for a quarter. No, you can’t control the natural disaster or political spat that’s giving the market fits right now. But you can choose to focus on your long-term purpose: a secure retirement for you and your family. That positive thinking and big-picture perspective could prevent a costly knee-jerk reaction.

  1. Consider your values

One of the best ways to drive negative thinking from our reactions is to focus on the things that matter the most to us. Reconnecting our decision making to our values can lead to solutions that make life more fulfilling.

Work might be the most common source of challenges in our lives. And while no one loves absolutely everything about their job all the time, it’s worth considering how your job affects your sense of freedom. Do those 40 hours per week give you the financial resources to spend your free time doing what you want with the people you love?  Are your skills and talents utilized in ways that make you feel like you’re making positive contributions? Does your employer have a mission bigger than profit that’s important to you?

If your answers are no, no, and no, you can choose to keep dragging yourself out of bed every Monday, resigned to the uninspiring week ahead. Or you can follow your values towards a more empowering choice. Consider a career change. Learn a new skill that will bolster your resume or line you up for a better job at your current employer.

If switching careers is really out of the question right now, choose to appreciate the parts of your job that you do well because of your unique skillset. And when you’re not working, make time for the hobbies, interests, and experiences that do fully engage your core values. Who knows? One day these pursuits might lead to exciting new opportunities for you and your family. If you’ve been committed to your values all along, you’ll be ready to make the right choice.

Are you choosing your best possible life?

If you’d like more insights on how you approach challenges and choices in your life, CLICK HERE to take our free ROL Index assessment. It will help you identify the areas of your life where you’re feeling good and those areas where you might want to make some enhancements.

After you’ve worked through the tool, you’ll receive a free, personalized report.

You may be surprised by the results! We’re here to answer your questions and to help you work towards a greater feeling of financial empowerment.

What Did You Learn Today?

What Did You Learn Today?

“In a world of change, the learners shall inherit the earth, while the learned shall find themselves perfectly suited for a world that no longer exists.”
― Eric Hoffer

It’s never been easier for adults to continue to learn after completing their formal education. Online universities, TED talks, “master classes,” podcasts, and even curated YouTube playlists put world-class professionals, teachers, and thinkers literally at our fingertips.

Are you taking advantage?

One common attribute of successful, happy people is that they are intensely curious. They never feel like the world has passed them by because they have made learning and self-improvement a lifelong process. In fact, Bill Gates places such a high value on continuous learning that he schedules annual “Think Weeks” where he holes himself up in a private study with books, magazines, and scientific papers.

Whether you want to stay ahead of the curve or just cultivate a curious mind, daily learning can have some major personal and professional benefits.

Upgrade your job.

Technology, automation, and the global marketplace have disrupted many jobs and career paths. Learning a new skill is a great way to “future-proof” yourself or even reposition yourself for a new job that you’ll find more fulfilling.

If you have an interest in tech, consider learning how to “code” by studying a programming language. If you’re a pen-and-paper artist, translate those skills to the digital world by learning website or graphic design.

Or, if you want to make yourself a little more global, why not learn a new language? Is your company preparing to expand into Europe or China? Do you have a large customer base that speaks Spanish? Learning the language of your business will prepare you for where that business is travelling next.

Think outside the office.

Learning can make life more exciting outside of the office as well. When we challenge ourselves to learn new things, we step outside of our comfort zones. We bring ourselves in contact with new cultures, new ideas, and new experiences.

French lessons might be your passport to a month vacationing in Paris. Signing up for a cooking class could improve your family’s health, or lead you to farmer’s markets that strengthen your connection to your community. Golf lessons could improve your enjoyment of the game and turn you into a better first coach for your young children.

Of course, learning doesn’t just mean signing up for formal classes. We spend so much of our lives on social media these days that it bears repeating: you can do a whole lot more with your phone and PC than get sucked into the latest tweetstorm. When was the last time you closed that Facebook app and opened up an ebook reader or audiobook player? You could also make your morning commute or exercises more stimulating if you cue up a podcast for some on-the-go learning.

Get ready for the long run.

One of the ways that your financial planning experience will be very different from your parents’ or grandparents’ is how we will account for your plan’s longevity. People today are healthier, living longer, and staying active later in life. In fact, Andrew Scott, Professor of Economics at London Business School and a fellow of All Souls, Oxford University, and the Center for Economic Policy Research, believes that hundred-year lifespans will soon become much more normal.

A commitment to learning and self-improvement will create positive attitudes and habits that will serve you well as you near retirement and prepare to enjoy your golden years. According to Professor Scott, “in a hundred-year life, leisure time will be used not just for recreation, but also, if you’ll excuse the pun, re-creation. You’re going to have to use leisure time not just as a consumption activity by watching Netflix, but as an investment activity. Using your leisure time to invest in yourself and not just rest we think will be crucial to deal with these changes.”

 

So, why not start making daily learning a part of your routine today?

Make a list of two or three things you’ve always wanted to know more about, or skills you wish you had, or talents you’d like to develop. If any of your learning goals are big enough that they might have an impact on your financial planning, we’d love for you to come in and tell us about them.

for more info on this topic and others, visit us at Heritage Financial Advisory Group

4 Ways to Feel More “At Home in Your Home”

4 Ways to Feel More “At Home” in Your Home

Lou Desepoli, President & Founder of Heritage

Do you feel “at home” in your home?

Your home is often the biggest financial purchase you’ll ever make. But is it also giving you the emotional payoffs you hope for?

Your home is an important part of your financial plan because we have to consider your rent or mortgage, utility bills, maintenance, and taxes as part of your monthly and long-term financial picture. But to get the best life possible with the money you have, your home should also be a safe place that makes you feel comfortable and relaxed.

Here are four things to consider when trying to make your residence feel more like home.

Your personal touches.

In this age of social media humblebrags and free two-day delivery, it’s never been more tempting to get sucked into “Keeping up with the Joneses.” But if you’re always trying to surpass you neighbor’s latest big splurge, you won’t be creating a space that’s truly yours. You’ll just be buying a copy of someone else’s idea of home.

Forget about the celebrity Instagram boards, and instead think about how to make your house reflect your family’s passions and stories. Turn an unused bedroom into a crafting workshop or personal study. Bring those old family photo boxes down to a framer and breathe new life into your walls. Brighten up shelves with mementos from favorite trips.

If you’re considering additions or backyard amenities, try thinking about these changes in terms of the experiences they can create for you and your loved ones. Sure, a swimming pool sounds nice. But a new deck and some green space might be a more versatile and welcoming environment for big family parties. Upgrading your kitchen might allow your inner gourmand to blossom into a truly talented cook.

Or maybe you create a personal space at a second home, like a lakeside cabin for fishing trips, or a condo with access to world-class golf and tennis.

Your personal comfort.

Sometimes less flashy upgrades to your living space have the biggest impact. A brand-new mattress isn’t as exciting as a backyard hot tub, but you’re certainly not going to spend 8 hours every day soaking!

If you’ve been sleeping in the same bed and slumping on the same couch for close to a decade, do some furniture shopping. Get some new pillows and sheets, or an ergonomic computer chair. These improvements aren’t just cosmetic – they’ll help you rest better and feel better.

Many of us also live with little quirks that have a negative impact on how we feel about our homes: that room in the back that doesn’t get warm enough in the winter, a leaky faucet, a living room with enough lighting for TV but not enough to read by, that nightmare hallway closet that’s going to explode someday. Minor household repairs and good old-fashioned spring cleaning can bring some welcome calm to the clutter we all accumulate.

Your personal geography.

Real estate pros like to say the three most important qualities in a home are: location, location, location. But the perfect spot for your first home out of college might not be the perfect place to get married, raise kids, and start your own business. Once your kids move out of the house and have families of their own, your feelings about where you live might change yet again.

Your home city or state might become more or less appealing to you over time as well. Beloved businesses and restaurants close. New establishments take their place. Friends come and go. The cost of living can fluctuate.

If your community no longer provides you the same comfort, activities, social circle, and engagement that it once did, it might be time to consider a move. This could be another reason to explore buying a second home for extended weekends closer to your family or vacations that allow you to explore your passions.

Your personal journey.

As your life changes, your experience of home will change along with it, especially as retirement nears. The big family homestead might become a difficult empty nest for you and your spouse to maintain as you age. The familiar comforts of home might start to create a restless sort of discomfort. You might feel drawn to new places, new people, and new experiences to keep your golden years fresh and stimulating.

Or, like more and more retirees, you might decide that your current home truly is where your heart is. You might “retire in place” and give your current home some TLC that will prepare it for the next phase of your life.

So what does “home” mean to you? Make an appointment to come in and talk to us about creating a financial plan that will provide you with as much comfort as your favorite reading nook.

 

You can make request an appointment with us by clicking HERE

For more great resources from the AARP, check out their website.

 

 

 

Don’t Just Work for Money, Work for Meaning

Don’t Just Work for Money, Work for Meaning

Mike Desepoli, Heritage

In a recent survey of 12,000 workers worldwide conducted by the Energy Project, only 50% of respondents found meaning in their work (1). Imagine spending 40 hours a week doing meaningless work. It’s soul-sucking, but it doesn’t have to be that way.

We understand why so many people stick with jobs that don’t provide meaning—it’s the money.

And working “for the money” is not all bad. Having financial security so we can provide for our families is obviously a worthy reason.

However, as important as money is, feeling that the work we do is meaningful matters too. It’s better for our health. It’s better for our relationships. And it just makes getting up in the morning much more desirable.

In an article in The Atlantic, author and cultural commentator David Brooks said, “There is no income level at which people are not desperate for meaning.” (2)

The good news is, there are proactive things we can do to derive more meaning from our work.

For some of us, finding that meaning in work might require a company or career change. For others, it could be as simple as reframing how we think about our current jobs and finding new ways to engage our talents. Here are a few strategies for maximizing your sense of meaning from 9 to 5.

Craft a new job out of your current job.

Hospital custodian isn’t a job that most people would consider meaningful, or even desirable. But Amy Wrzesniewski, now a professor at the Yale School of Management, found that many of the custodians she talked to didn’t consider their jobs low skilled or unfulfilling (3). Instead, they felt they were part of a team that was helping people get better. They may not have been performing surgery or prescribing drugs, but they believed their job was an important part of a bigger process.

In addition to basic cleaning duties, these custodians also went out of their way to bond with patients and visitors. They talked to unvisited patients, and even kept in touch with some after they were discharged. Rather than trying to find a different job, these custodians had crafted a more meaningful job out of their assigned work.

The job crafting concept can provide a new perspective on the work you do (4). Your current job might provide opportunities for expression, connection, and creativity that you never realized were there. Try to reconfigure your approach to daily work tasks around these opportunities.

Focus on WHY, not what.

It’s easy to get so bogged down in the things we have to do at work that we lose sight of why we do them. It can be helpful to your sense of meaning to consider the end result of your work. Especially, as it impacts other people.

For those happy hospital custodians, the Why was helping the ill. Your Why doesn’t have to be that altruistic. Although, somewhere at the end of all that paperwork and accounting there’s a person with a need you helped fill. Or maybe a problem you helped solve, an experience of joy you helped deliver.

Your Why could be the meaning you find from engaging your unique skill set. Instead of sagging under the weight of all that copy you have to edit, appreciate how your work engages your writing skills. Maybe a problem along the company’s supply chain engages your critical thinking. The company itself could also be your Why, if you’re working for a business that has a mission that you really believe in. You could also find a meaningful Why in the social bonds you create with the people you work with and the customers who rely on your products and services.

Examine your mindset.

If adopting a new mindset about your work doesn’t help you find more meaning … try examining your mindsets.

Business writer Dan Pontefract believes that we have three distinct ways of thinking about our work as it relates to our sense of meaning (5):

The Job Mindset is a “paycheck mentality,” in which people perform their jobs purely for compensation.

The Career Mindset is triggered when we focus on advancement. Things like making more money, getting that big promotion, increasing our power or sphere of influence.

Finally, the Purpose Mindset engages our feelings of passion, innovation, and commitment, and an outward-looking focus on serving your employer as a whole.

Pontefract recommends spending a week tracking your mindset. At the end of every day, write down approximately how much time you’ve spent in the Job, Career, and Purpose mindsets. At the end of the week, tally up the totals.

What do these numbers tell you about your mindset at work? Are you spending the majority of your time grinding towards that Friday paycheck, or looking for ways to get ahead? Further, how does your time spent in the Job and Career mindsets compare to the time you spend in the Purpose mindset? Can you use job crafting to adjust your mindset and focus your energy more? What about how your work contributes to something bigger than money?

If you can’t balance out these mindsets in a way that allows you to find more meaning in your work, you might need to adjust your role. Or you might need to explore new career paths. Either way, we’d be happy to discuss this with you and help you position your financial resources to support your decision. Please contact our office to setup an appointment.

 

Sources
  1. https://www.nytimes.com/2014/06/01/opinion/sunday/why-you-hate-work.html?_r=1
  2. https://www.theatlantic.com/business/archive/2016/07/meaning-work-happiness-brooks/489920/
  3. https://www.inc.com/jessica-stillman/what-you-can-learn-about-career-satisfaction-from-a-hospital-janitor.html
  4. http://positiveorgs.bus.umich.edu/cpo-tools/job-crafting-exercise/
  5. https://hbr.org/2016/05/youre-never-done-finding-purpose-at-work

Are You Financially and Emotionally Prepared for Life’s Big Transitions?

Are You Financially and Emotionally Prepared for Life’s Big Transitions?

Mike Desepoli, Heritage

Financial planning is more than just a series of savings and investments you lock away and forget about. Your money doesn’t exist in a vacuum. Your financial needs are going to fluctuate in response to the transitions that we all go through as we work, raise our families, and look ahead to retirement.

Managing these transitions is one of the keys to maximizing your finances and to achieving a greater Return on Life™ (ROL).

It’s Better to Prepare Than Repair

When it comes to your financial future, it’s easier to prepare for what’s ahead than it is to repair mistakes. With that in mind, we have a tool called The $Lifelineä. It’s designed to help you prepare for life’s transitions by asking you to anticipate what’s coming up and the age at which you expect the transition to happen.

You can then plot the applicable transitions on your $Lifeline, and use a color-coded system to rate the transition based on whether it is a High, Medium, or Low priority. If you’re married, you and your spouse can plot both shared transitions and transitions that are unique to each of you on the same $Lifeline for a complete picture of all the milestones that will affect your household, and your finances. Each transition also includes links to additional resources that you can consult for more information.

Let’s take a look at the six $Lifeline categories, and a few of the important transitions we can help you map out and prepare for:

Family
  • Expecting a child
  • Special family event
  • Assistance to a family member
  • Child going to college
  • Child getting married
  • Empty nest
Health
  • Worried about an aging parent
  • Concern about the health of child
  • Possible concern about the health of spouse
  • Family member with disability or illness
  • Recent death of a family member
  • Create end of life medical directive

 

Work
  • Contemplating career change
  • Job re-structuring
  • Expand business
  • Start a new business
  • Acquire / purchase a business
  • New job training / education
Retirement
  • Downshift worklife
  • Full retirement
  • Changing residence
  • Start receiving Social Security income
  • Eligible for Medicare.
  • Start receiving retirement distributions
Financial
  • Refinancing mortgage
  • Reconsidering investment philosophy
  • Significant investment gain
  • Significant investment loss
  • Considering investment opportunity
  • Receiving inheritance
Giving
  • Stipend to family member
  • Gift to children / grandchildren
  • Develop / review estate plan
  • Create a foundation
  • Create or fund a scholarship
  • Fund a cause or event

 

Transitions Change Over Time

Once we’ve plotted your anticipated life transitions on your $Lifeline, we can start discussing the transitions that are most important to you from an immediate planning standpoint. Maybe you need to understand the financial implications of taking care of an aging parent. Perhaps it’s figuring out how to pay for your kids’ education. Or you may want to know the best time to start receiving pension payments.

Over time, as new transitions arise and old ones get completed, we can add, remove, and reprioritize transitions as necessary.

The easiest way to throw off your financial plan is to make a rash, emotional decision in the middle of a difficult moment. The $Lifeline, and our Life-Centered Planning process, will help you avoid reacting – or overreacting – to the ebbs and flows of your life by putting you into a more proactive mindset about your financial future.

You’ll be less likely to take on a risky second mortgage to pay for your son’s freshman year of college and your daughter’s wedding if you plan for those events in advance—something the $Lifeline helps you visualize.

As you prepare to go through the $Lifeline exercise, take a look at the categories and transitions listed above. If you’re married, talk to your spouse about them. Write out a list of transitions that you know you’ll want to plot on your $Lifeline. When we meet, we’ll fire up the tool and create your personalized $Lifeline so you can start preparing for life’s big transitions.

 

Are You Living Your Life On Purpose?

Are You Living Your Life On Purpose?

Lou Desepoli, Heritage

Why, day in and day out, do you do the things that you do?

Because you have to? Is it because you want to? Or is it because you’ve had the same routine for years and you’re used to it?

If you feel like your life is something that just happens to you, it’s time to reassess how you’re spending your time. Financial security, stability, and creature comforts are all important. But feeling that your life has purpose will become more and more critical to your emotional and physical well-being as you age — especially when you finally retire.

A healthy sense of purpose.

Research into the area of human well-being draws a distinction between happiness (experiencing pleasure and avoiding pain) and the feelings of meaning and self-worth that we derive from our lives (1).

Too often, we focus on the former and neglect the latter. This is why the sheen wears off so quickly from a big-ticket purchase. Buying a new car or big-screen TV gives us a quick hit of pleasure. But sooner rather than later, new things become just more things that we’ve accumulated. Once that initial happiness evaporates, we find there’s no additional layer – no purpose – to improve our well-being.

Researchers have also found that people who feel like their lives have purpose live longer and show decreased risk of cardiovascular problems (2). And as you age and prepare for retirement, living with purpose helps to limit your risk of cognitive problems, such as Alzheimer’s (3).

The purpose of work and family.

Most of us tie purpose to the things that we spend the majority of our time doing: working and raising our families. Again, it’s important to draw a distinction between simple happiness and purpose.

A doctor who has to deal with ill people and mortality might not consider her job “happy” all the time. But helping people gives her that critical sense of purpose that rounds out her feelings of well-being.

Taking care of children will, at times, make even the most patient parents want to pull their own hair out. But feelings of love, connection, and responsibility make both happy family vacations and frustrating afternoons in timeout purposeful.

If you feel like your life is lacking purpose, start by looking for misalignment in these two areas. Is your job “just a job” that pays the bills? How could you pivot to a career that uses your unique gifts and skills to create purpose? Or are you working so hard that you’re missing key family events, which are also critical to your sense of purpose? Are there ways to improve your work-life balance?

It’s never too late to start living.

Many people believe that living and giving generously with their time, talents, and/or finances is a luxury they can’t afford, especially once children, mortgage payments, and college tuition enter the picture. However, research indicates that senior citizens frequently cite “dying with their music still in them” as one of the biggest areas of regret when they look back on their lives, meaning, chances they didn’t take, ideas they never pursued, or opportunities they watched pass by. It’s not money they’re regretting, it’s the sense of purpose they missed out on that would have improved their Return on Life.

Of course, not everybody can have that “perfect” job. But even in those situations, think of it not so much about the work you do, but “who you bring” to the work you do. Find ways to bring purpose to even the most mundane jobs and how that work is helping others.

And it’s never to late to find that purpose. Even seniors can discover new passions that will give their golden years purpose if they approach retirement with an active, enthusiastic mindset.

If you’re having trouble getting started, try asking yourself, “Why do I get out of bed in the morning?”

Is it to take care of your family? If so, then consider planning a family vacation for the summer. Coaching your child’s youth sports team. Turning dinner time into a group cooking activity. Or setting a regular monthly date night with your spouse.

If you find purpose in helping those in need, consider finding a volunteer position for a few hours a week.

Do you like to express yourself? Then perhaps start a blog or a digital photography website that you can work on in your free time. Turn that spare bedroom into a craft room.

And if you think your purpose is simply to make more money? Well, then maybe you need to start asking yourself better questions. Remember, money is a means, not an end.

We encourage you to come in and talk to us so that we can start a new dialogue about how your financial plan can help you get the best, most purposeful life possible with the money you have.

 

Sources:
  1. https://www.ncbi.nlm.nih.gov/pubmed/11148302
  2. https://www.ncbi.nlm.nih.gov/pubmed/26630073
  3. https://jamanetwork.com/journals/jamapsychiatry/fullarticle/210648

 

 

Debt: What’s Your Story and How Do You Feel About It?

Debt: What’s Your Story and How Do You Feel About It?

By Mike Desepoli, Heritage

In a recent study, half of Americans said their debt and expenses is equal to or greater than their income. 1 Revolving credit, particularly credit cards, is an increasingly significant part of the equation. According to the Federal Reserve Bank of New York’s Household Debt and Credit report data, Americans’ total credit card debt hit $905 billion in 2017 – an increase of 8% from the previous year. 2

The phrase “credit card debt” usually triggers red flags when we’re talking about long-term financial planning. And in fact, the average US household now carries $15,654 on their cards, and pays $904 annually in interest. 2 But debt, in and of itself, isn’t good or bad. Instead of making a value judgement about how you use debt, when working with clients we like to understand:

  • What is your debt story?
  • What are your attitudes about debt?
  • Why do you feel the way you do?
  • How are your debt levels affecting the Return on Life your money provides?

Having a deeper understanding of the above helps us do a better job positioning your money to work more effectively for you.

What’s the big picture?

Our current high debt levels reflect a previous generation of low interest rates, an active housing market, a robust credit market, and relative peace and prosperity. This meant more consumers with more plastic and more loans. Again, debt is not bad in and of itself, especially in a healthy economy. But from 2007-2009, many highly-leveraged people and companies were vulnerable to foreclosure and bankruptcy during the Great Recession.

People who were born between the Great Depression and World War II grew up in the daily realities of war and lean markets. Unsurprisingly, this group tends to avoid using credit cards when they can. Instead, they rely on the cash in their hands and the checkbooks they balance with pen and paper.

That credit-aversion seems to have skipped the Boomer generation, who, generally speaking, happily used credit cards and home-equity loans.

The current generation of young workers—Millennials—seem to be warier about carrying debt than their parents were.

Young people are entering the workforce at a time when household income is struggling to keep pace with the cost of living. They believe taking on debt would only widen that gap. In particular, the costs of medical care, housing, and food continue to grow faster than income. 2

Many underemployed Millennials are living at home into their late-20s, so they aren’t using credit cards to finance luxury items or buy first homes. Even for millennials who do find good jobs after college, many start their adult lives in the red because of student loans. As of September 2017, the average US household had $46,597 in student loan debt. 2

Millennials are less enthusiastic about investing in the markets. Growing up during the Great Recession shook their faith in the economy. Growing up in the shadow of 9/11 and terrorism, they’ve only known a world unsettled by global unrest.

Millennials are also a more conscientious consumer group than their parents were. They want to spend their time, and their money, on things that help to make the world a better place. They consider personal fiscal responsibility to be part of a greater good.

What’s your story?

While looking at big picture debt trends is useful for predicting where the economy is headed, your Life-Centered Plan is about you. Now would be a great time to take a minute to consider:

  • How do you feel about debt?
  • Why do you think that you feel the way you do?
  • Are you comfortable with your current level of debt?
  • Is your current level of debt causing any problems with one of your loved ones?
  • Do you pay off your credit card balances in full every month?
  • How do your attitudes about debt align or differ with those of your parents? Why do you think that is?

We encourage you to reach out to us and we can take a closer look at your financial situation and help you get on a more comfortable path. Together, we can create a financial plan that will improve your Return on Life.

 

Sources
  1. Half of Americans are spending their entire paycheck (or more) http://money.cnn.com/2017/06/27/pf/expenses/index.html
  2. Nerdwallet’s 2017 American Household Credit Card Debt Study https://www.nerdwallet.com/blog/average-credit-card-debt-household/

 

Savings: Does Your Desire to Save Match Your Reality?

Savings: Does Your Desire to Save Match Your Reality?

Mike Desepoli, Heritage Financial Advisory Group

“The only money that’s really yours is the money you spend.

Everything else goes to somebody else.”

-Teddy Chafolious

That piggy bank we remember from childhood wasn’t just a place to store our birthday money and spare change: it was a lesson, a way our parents encouraged us to get into the habit of saving. Many parents even go so far as to deposit half of any monetary gifts their children receive directly into a savings account, just to drive the point home. Adults who took that lesson to heart might set up automatic deposits into long-term savings or retirement accounts from their paychecks every month – a modern mechanism for implementing this age-old lesson.

But the quote from Teddy Chafolious raises an important point: What are we saving FOR? Many new investors come to their financial advisors with a number in mind: “I want to save $1 million before I retire.” There’s even something of a fad among millennials who work as hard as they can, save as much as they can, and try to retire before age 50.

But why? After all, “you can’t take it with you.”

It’s important to have financial goals, and committing to a regular savings plan is good first step towards achieving them. But if you treat your long-term financial planning as just a series of targets to hit, or numbers you have to drive up as much as possible, your return on investment is going to be a lot higher than your Return on Life – the feelings of happiness and fulfillment that your financial planning should provide you.

How much are Americans saving?

According to the US Bureau of Economic Analysis, Americans today are saving a lot less than they have in years past. Personal savings in the United States averaged 8.29 percent from 1959 until 2017. The rate for 2017 is hovering around 3 percent. Experts tie this historically low savings rate to increased household spending, which continues to outpace wage increases, and high levels of revolving debt, like credit cards.

Figures like these drive many people to the opposite end of the spectrum: they save as much as they possibly can, especially if they’re nearing retirement.

Finding balance.

We tend to think that the person saving more is doing a better job of managing his or her money than the person saving too little. But neither extreme is going to maximize your Return on Life. Spend too much enjoying the now, and you might end up having to work much longer than you want to – maybe even all the way through retirement. Save too much too early, and you and your family might miss out on the experiences that you deserve to enjoy with your hard-earned money: big family vacations, a new home, creature comforts, entertainment and culture that will enrich all of your lives.

Worse, new retirees who have spent their lives stuck in “savings mode” often have trouble transitioning to the reward mentality that should provide for a meaningful retirement. These retirees worry so much about running out of money that they often neglect their own wants and needs, to their emotional and physical detriment.

Reality check.

So how do you find that balance between enjoying today and preparing for tomorrow?

First, ask yourself if your rate of savings is in line with your reality. Are you saving so much that you’re not enjoying life as much as you could be? Or are you hovering around that 3 percent savings figure, telling yourself that you’re putting enough money away when you know, deep down, that you’re not?

Next, make an appointment with your Advisor to talk about your financial goals, and your vision for a dream retirement. Work together to find that saving/spending balance that’s going to align your savings with your reality, and hopefully, your goals and dreams. Find that sweet spot, and your money won’t just be numbers on a balance sheet. It will be yours. Don’t have an advisor? Here is a helpful article to show you what to look for.

Overlooked Keys to Being a Successful Investor

Three Overlooked Keys to Being a Successful Investor

Mike Desepoli, Heritage

Does investing strike “fear” in you? We once heard somebody say the word “fear” stands for “False Evidence Appearing Real.” That seems to apply to investing. Here’s why.

The stock market makes some people nervous. This can be especially true for young people who grew up during the Great Recession. Not only did these folks see market volatility at its worst, but they also came away with negative impressions about the financial markets in general.

The truth is that the market is neither a one-way ticket to instant riches nor a dangerous game for insiders only. There is risk involved in any kind of investment, but if you understand how the market operates in the long run, then the rewards can be significant.

By understanding the following three important facts about the market, you might be able to turn “fear” into “False Evidence Appearing Real” and not get scared out of letting your money work hard for you in the market.

  1. The market tends to move in long cycles.

The amount of info we have at our fingertips makes it tempting to check in on our investments weekly, daily, or even hourly. As a financial professional, though, we take a much wider view of the markets. And while past performance is no guarantee of future returns, the history of the market continues to trend upwards.

Consider the S&P 500 Index. If we go back and look at all the bull (upwards) and bear (downwards) markets from 1926 to 2017, the average bear lasted 1.4 years and resulted in a 41% loss on average. However, the average bull lasted 9 years, and gave investors a 480% gain on average, according to First Trust.

When volatility strikes, patience is usually a good course of action. Your financial plan is designed to provide for the rest of your life, not for one bull or bear cycle. Instead of panicking when the market dips, try to think of volatility as a tax that investors pay on the wealth that the market can create.

And if you do find yourself checking in on your investments as regularly as you check your email, maybe think about uninstalling that app—or calling us.

  1. Make consistent contributions to your portfolio.

Besides struggling to accept volatility, many people are skittish about the markets because they feel powerless. Money goes in, and decades later, who knows what’s going to come out. They feel that politicians, corporations, and geopolitical tumult will have the final say in how big their retirement nest egg grows.

However, often times the biggest factor that determines the success of your investments is simply contributing new money on a consistent basis. As discussed above, the market will most likely trend upwards in the long run. The more of your money that’s along for the ride, the bigger those eventual gains will be.

For example, suppose that you decide to invest $10,000 every year for 10 years into your portfolio. In a flat market returning 0%, that $10,000 would account for 100% of your portfolio’s gains. In a modest market returning 6% per annum, that $10,000 would account for 73% of your portfolio’s gains. And even in a bull market, charging ahead at a rate of 12%, your $10,000 would STILL account for more than half of your portfolio’s gains, according to Invesco.

  1. Focus on what you can control.

To be sure, part of investing involves accepting things you can’t control. A hurricane on the other side of the world might rattle the markets for a couple days. A large company might become embroiled in an accounting scandal. The Federal Reserve might make an unexpected interest rate move. Market corrections might follow.

But if you understand volatility and continue to focus on the big picture, you’ll start paying more attention to the things you can control, like a monthly budget that allows for automatic contributions to your investment and retirement accounts.

Better yet, think about setting a goal to ramp up the size of those contributions. Many people try to save or invest 10% of their income. Can you shoot for 15%? 20%? The bigger the contributions, the bigger the payoff when you retire. And if retirement isn’t on your radar, that big investment cushion will go a long way toward giving you a feeling of freedom.

If you’re still unsure about investing in the markets, make an appointment to talk to us. We can help clear away any misconceptions you might have about investing and craft a plan that makes you comfortable about how your money is working for you.

 

 

Why We Love Money (And You Should, Too!)

WHY WE LOVE MONEY (AND YOU SHOULD, TOO!)

Mike Desepoli, Heritage

“Money can’t buy happiness but somehow it is better to cry in a BMW than on a bicycle.”
We often end up listening to the endless arguments upon whether to be materialistic or not. While spiritually we should not really become materialistic because world’s greatest joys are not hidden in materialistic items at the same time living in a practical world around people, you cannot help but be materialistic after all without money you cannot go anywhere (think about your cab driver).

Here is our take on whether to love money or not and to what extent?

MONEY BUYS YOU THINGS

Off course world’s greatest joys are hidden in the things that money cannot buy but think of the dress that you always wanted to buy, think of the vacation that is too expensive but you really wish to experience it, think of the joy which is beheld in a double crest cheesy pizza. These things are not possible without money; do you still believe that money cannot buy joy?

MONEY MOTIVATES

Won’t you be joyous to see your bank balance hitting the sky? Well, isn’t the whole point of finding a job, earning well, having a well-settled life somehow revolves around earning money too. It is true that job satisfaction is primary to be thought upon but don’t you think that often money motivates you to do more or to do better? Come on who would refuse to put some extra efforts for monetary benefits offered?

MONEY BRINGS PRESTIGE

Whether you agree or disagree, the society has agreed upon that fact that money brings in prestige. While respect has to be earned and there are no two ways about it but your lifestyle adds on to this respect as well. A king sized lifestyle gets a king sized treatment and what is a king without treasure? Are you getting our point?

THE DESIRES

We are humans and that is why our desires are unreasonably endless. However, have you ever noticed that each desire of yours stops at money? Whether you wish to learn a newer skill or pack your bags for travelling. Everything begins and ends with the amount that your bank balance reads. The unfulfilled desires bring anxiety and with no money in your hand, you are going to pile up in anxiety only.

UNDENIABLE FACTOR

No matter how much you hate minting money so matter how much denial do you possess for money the reality is that money forms an integral and undeniable element of life. Your stand in the society, your extracurricular activities, your lifestyle, your efficiency of work and so on is determined by money.

We agree that greed can dig your grave but, a complete denial of money is yet another form of digging your graves too. While it is vital to be contented with what you have, there is no harm in desiring for a little extra either.

GOT A PIECE OF ADVICE ON MONEY? WE WOULD LOVE TO GET YOUR FEEDBACKS IN COMMENTS

Do you love money too? Check out #AskTheAdvisor 41: 3 Things Successful Investors NEVER Do!

7 Simple Tips to Curb Your Spending

7 Simple Tips to Curb Your Spending

 By Mike Desepoli, Heritage

 

  1. Create a 30-day list

Make a new rule: you can’t buy anything (except necessities) until a 30-day waiting period has passed. Put a 30-day list on your refrigerator, and when you have the urge to buy something, put it on the list with today’s date. After a month has passed, you can buy the item. Many times the urge will have passed and you can just cross the item off the list. This works if you stick to your rule. The only exceptions would be groceries and other similar necessities.

  1. Don’t go to the mall

You only get the urge to buy on impulse if you’re in a shopping area (or if you’re watching TV). So, prevent the urge from happening in the first place by not going shopping. Don’t go to the mall or Walmart or other shopping areas. Only go to a store if you have a specific necessity to purchase, and go with a list. Don’t buy anything not on that list. Now get out as soon as possible. Don’t just walk around window shopping for entertainment, or you will be sorely tempted. Find other ways to have fun.

  1. Don’t go to online retail sites

Just as the mall will create the urge to buy, so will online sites such as Amazon. They make it too easy to buy something. Instead, stay away from these sites.

  1. Monitor your urges

Make it a point to monitor your urges, if it’s a big problem. Keep a little piece of paper, and put a tally mark on it every time you get the urge. This helps you to become more conscious of the urge, which is usually something we don’t even notice. Different symptoms can appear, such as faster breathing or a faster heart rate, when we have the urge. By becoming more aware of the changes in our body, we can begin to get the urges under control.

  1. Plan your purchases

Making a list before you go shopping is important. If you can make it a habit to stick to that list, you’ll eliminate a lot of little impulse buys. For other purchases, make it a habit to plan them, save for them, shop around, and even see if you can get it for free. Going through this process ensures that your purchases are more deliberate, and less on impulse. Plan ahead for birthday and Christmas gifts, and other large purchases that you know are coming up in the month ahead.

  1. Ask questions

Before you buy anything, ask yourself a series of questions. Is the purchase going to improve your life in some important way? Is the purchase supposed to make you feel better? Does it help you meet one of your life goals? Will it simplify your life? These are useful questions to help you evaluate the value of a purchase, and why you’re making it. Be honest with yourself — don’t try to sell yourself!

  1. Keep the end in mind

It’s useful to have clear goals in mind at all times. What do you want to do with your life? Do you have financial goals that you’re trying to accomplish, in the long-term and medium-term? Keep your savings goals in mind, and know when you’re about to make a purchase how the purchase will affect your goals.

Fore more information on this topic, check out our weekly Video Show by visiting the link below:

#AskTheAdvisor 59: 1 Simple Tip to Curb Your Spending Habits

Managing Investment Risk

Managing Investment Risk

By Mike Desepoli, Heritage

If we know one thing about stock market investors it’s that the better the market performs, the less and less they think about risk. The first thing every investor should know and accept is that there is no such thing as a surefire investment. Risk is a part of the process. No matter what you invest in, there is always a possibility that you won’t turn a profit – or worse: you can lose some or even all of what you put in to it. You can manage risk, though, with a few proven techniques.

Asset Allocation

The first step in managing risk is to practice asset allocation. This means having your money in a variety of asset classes, which include cash, stocks, and bonds. Doing so is a protective measure – typically when stocks are doing well, bonds aren’t, and vice versa. Having some money in cash (or cash equivalents, which are extremely low-risk investments such as Treasury Bills and money market funds) makes sense, because outside of inflation risk – the slow but steady increase in the cost of living – your money is pretty safe.

Generally speaking, cash is the least risky of the asset classes, then bonds, and then stocks. Where you put your money depends largely on what type of investor you are, so be sure to allocate your funds according to your comfort level and needs:

• Aggressive Investor. 75% of holdings in stocks, 15% in bonds, and 10% in cash
• Balanced Investor. 50% of holdings in stocks, 25% in bonds, and 25% in cash
• Conservative Investor. 25% of holdings in stocks, 25% in bonds, and 50% in cash

Diversification

After you spread risk by investing in different asset classes, you can manage it even further through diversification. There are many different types and classes of stocks and bonds – some are much more risky (but with the potential for greater reward) than others. Therefore it is a good idea to divide your funds among a variety of investment vehicles with different risk and reward potentials.

For example, consider purchasing shares of stock in an assortment of different sectors. A sector is a subset of a market, and stocks are often grouped by the company’s type of business. Sectors include utilities, transportation, technology, health care, energy, and communications services. When you diversify your holdings among sectors, you spread risk – if one sector is doing poorly, another is probably doing well.
An easy way to diversify your holdings is with mutual funds, since they are comprised of many different investment types and classes.

Dollar Cost Averaging

Dollar cost averaging is another way of managing investment risk, and nothing can be simpler to do. You can practice dollar cost averaging by purchasing securities with a fixed amount of money at regular intervals. This way you buy more shares when the price is low and fewer shares when the price is high, thus reducing the over-all cost of the shares purchased.
If you have a retirement account through your employer, you already practice dollar cost averaging. You are having a set amount of money deducted from each paycheck deposited into your retirement account. And whether the mutual fund is doing well or poorly, the same amount of money is being invested. Done over many years, you ride out the highs and lows of the market.

Review and adjust your portfolio (your collection of investments) regularly. Even if you are comfortable with a great deal of risk, the closer you get to retirement, the more conservative your investment portfolio should become. The last thing you want is to have the bulk of your money – cash you are expecting to have when you stop working – in investments that have a high likelihood for loss.

What To Do With Your 401k When Changing Jobs

What To Do With Your 401k When Changing Jobs

By Mike Desepoli, Heritage

Last year, millennials were nicknamed the ‘job-hopping generation’ after a Gallup report revealed that 6 in 10 millennials are open to new job opportunities.

According to this report, millennials have a reputation for job-hopping and are said to move freely from company to company, more so than any other generation.

That being said, I don’t think switching jobs is a trait unique to millennials only, even though they are said to job-hop three times more than other generations.

The job market is ever-changing and is not like it used to be. Fewer companies offer pensions and some entry-level jobs offer very little benefits or stagnant wages. Self-employment, temporary work, and side jobs have all become increasingly popular work options.

Also, there is less loyalty among employees who realize they can be laid off at any given time.

At the end of the day, if you come across a better job opportunity that you think you’ll be happier with and has better pay and benefits, you may feel tempted to switch jobs and there’s nothing wrong with that.

If you have a 401k however, you may be wondering what you can do with it when you do secure another job. You don’t want all the money you saved for retirement to go to waste, so here are a few options.

 

Keep the Money in Your Old 401k

Most companies will let you leave the money you saved for retirement in your 401k where it is. In other cases, there may be a balance requirement.

Employees who move on to another company may choose this option out of default especially if they have no idea what to do with their 401k. The major downside is that you won’t be able to contribute to your 401k anymore.  Also, you’ll have to keep track of more than one retirement account.

If you tend to switch jobs every couple of years, you could wind up with multiple 401k plans that you can’t contribute to which is why it’s best to consider some of these other options first.

 

Roll Over Your 401k to Your New Company’s 401k

If you had a good 401k plan with your old employer, you can easily roll it over to your new 401k. Check to see what the investment options are along with the fees with your new company. If you don’t like your current options as much as your old plan, consider rolling it over.

Most employers will accept a 401k rollover. As long as you have at least $5,000 in your account, it’s your legal right to do roll it over. If you have less than $5,000 in your account, your employer will have the option to cash you out of the plan.

If you’re going with this option, always ask for the rules to be clarified since you may have limitations since you’re no longer with the company. For example, you may be charged extra fees since you no longer work there.

Move Your 401k to an Individual Retirement Account (IRA)

This is another option you’ll have especially if you don’t like your new company’s 401k plan. IRAs and Roth IRAs are great options that typically have lower fees and allow you to have more control over your investment options. With an IRA, you will just have more control overall. You can choose low-fee investments and won’t be limited to name just your spouse as your beneficiary like with most 401k plans.

Keep in mind that there is a difference between a traditional IRA and a Roth IRA. With a traditional IRA, you contribute pre-tax dollars.  The money is not taxable until withdrawals begin. If you withdraw funds before then, you’ll most likely have to pay a penalty fee.

With a Roth IRA, your contributions are taxed when you make them so your earnings will be tax-free. Withdrawals are also tax free once you attain age 59 1/2.

There are also income limits to be eligible for an IRA. In 2017, you must earn less than $118,000 if you’re single and less than $186,000 if you’re married. The maximum contribution you’re allowed to make per year is $5,500 and $6,500 if you’re 50 or older.

Cash Out Your 401k

This isn’t the best option, but it is an option nonetheless. If you want or need the money in your 401k account to pay bills, meet other expenses you have, or even to reinvest another way, you can simply cash out what’s in your retirement account.

A major downside is that you will have to pay taxes on the money along with a penalty. If you cash out a smaller amount, what you receive will be even smaller. If you cash out a large amount, it won’t really be worth it due to your large tax bill.

You could also destroy your retirement nest egg in the process especially if you received a nice 401k company match.

Depending on how many times you switch jobs that provide you with a 401k account, you may need to make the decision of what to do with your old 401k more than once. To determine which option is best for you, determine your current and future needs. Always consider factors like fees along with your investment options.

I’m sure everyone wants to retire some day so it usually the better option to keep money from your 401k and roll it over or put it in an IRA.

2 Helpful Tax Strategies for Year End

2 Helpful Tax Strategies For Year End

By Kristi Desepoli, Heritage

If you’re like most taxpayers, you have no clue about the most effective tax strategies for these financial vehicles – especially if you lack access to expensive accountants and attorneys. Here’s some guidance. Here are two common situations and innovative solutions that might help.

 

You are self-employed and want to save tax.

You feel you pay too much in taxes and want at least $17,500 of deductions. You are not an employee with a company that offers a 401(k) retirement plan but you still need more deductions than the $5,500 annual contribution ($6,500 if 50 or older) limit for a traditional individual retirement account.

 

Solution: a solo 401(k), aka an independent, one participant or family 401(k). Using this vehicle in this case hinges on your being a sole proprietor or operator of the business with your spouse, and have no nonfamily employees.

 

Let’s say your spouse works in the business with you and is younger than 50.

He or she can contribute up to $17,500 annually to the solo 401(k) plan, and this is called employee salary deferral of up to a full year’s compensation. If your spouse earns $17,500 this year ($18,000 in 2015) he or she can put all of $17,500 into the solo 401k(k) plan.

 

Assume you are 50 or older and now also contribute a maximum $23,000 (the maximum $17,500 contribution for 2014 tax year plus the $5,500 catch-up amount) employee salary deferral to a solo 401(k) plan. With an eye to even further deductions, you can also kick in the employer contribution – remember, you are both the employee and the employer – of 20% of your net earnings if you are a sole proprietor and 25% if your business is a corporation.

If you are 50 or older by this Dec. 31, you can save up to $57,500 in the solo 401(k), a combination of the employee salary deferral and the employer contribution. For 2015, the total maximum contribution increases to $18,000 salary deferral plus $6,000 catchup plus $35,000 employer contribution, or $59,000 total.

 

Additional points:

 

You can still contribute to an IRA in addition to your solo 401(k) contribution.

 

Setting up a solo 401(k) can be inexpensive and easy. A reasonably priced independent 401(k) administrator can cost as little as $500 for set up and $500 in annual fees. Brokerage firms can offer lower costs but you then are tied to their investment choices.

 

If you have non-family employees and want to offer a workplace retirement plan, your normal 401(k) plan may come with potentially higher set-up and maintenance fees. You will also be subject to nondiscrimination rules. This means that you must allow your permanent employees into the plan and that your employer profit contribution must treat all employees – including you the owner – equally.

 

You want to leave a tax-free legacy.

In one excellent example, a retired nurse, married, 75, wants to leave a legacy to her 9-year-old twin grandsons. The most tax-effective strategy: Combine the Multi-Generational (MGIRA) strategy with a Roth IRA conversion.

 

The MGIRA, aka an extended or stretch IRA, allows you to designate a successor beneficiary to pass on funds you saved for retirement. Converting other kinds of IRAs to a Roth IRA offers many advantages, including eventual tax-free withdrawals of qualified distributions.

 

We structured a Roth conversion of the nurse’s $385,000 traditional IRA and paid the conversion tax with non-IRA funds. The two grandsons will each get slightly more than $2 million tax-free over their lifetimes in annual checks without ever raiding the principal. Now that is one effective tax strategy.

 

Let’s hope they raise a glass to the grandma who will still be looking after them.

 

Social Security Finally Gets a Boost

Social Security Finally Gets a Boost

by Kristi Desepoli, Heritage

The cost of living adjustment announced by the Social Security Administration will be impacting seniors collecting monthly checks in 2018. With a 2% increase, this is the largest adjustment since a 3.6% increase in 2012.  In comparison to 2016 where seniors only got a 0.3% increase, and none at all in 2015, 2% can make quite the difference.

In 2017, the average amount a beneficiary receives is about $1360 per month. With a 2% increase in 2018, that would be about another $27.40 per month, or an extra $326 for the entire year.  Although this seems great initially, of course there is a catch.  The higher cost of living adjustment stems from the effect of higher inflation. Best case scenario, seniors are being given enough additional income to keep up with a higher cost of living.

How is cost of living determined?

The annual cost of living increase is determined by taking the average rate of inflation from July through September and comparing it to the same period of the previous year, using an index known as CPI-W. Originally the cost of living adjustment increase was projected to range between 1.6% and 1.8%. However there was a sudden swell in inflation in August and September due to hurricanes Harvey and Irma- ultimately putting a few extra dollars in seniors’ pockets next year.

 

When Was Your Last Financial Check Up?

The Importance of an Annual Financial Check Up

By Kristi Desepoli, Heritage

 

It’s crazy to sit back and think about everything that can happen in a year. With all of the curveballs that life throws your way, it’s important to adjust accordingly.  When it comes to financial success, it’s critical to have a plan in place and make adjustments as things change.  What may have been important last year, may not be as important this year, and it’s imperative to assure your plan aligns with what is significant to you and your goals.

Here are three reasons why an annual financial check up should be at the top of your to-do list:

Your retirement plan may no longer reflect your goals.

Along with everything else, our priorities tend to change. What many see retirement looking like at one point, can often change drastically after the addition of grandchildren, real estate purchases, or any other major life-changing event. Even in the event that your goals remain the same, and no major life changes occur, sitting down annually to review and make any necessary adjustments is critical in assuring that your retirement dreams become a reality.

Your insurance needs and beneficiaries may need to be updated.

Insurance can serve as a great protector against the unexpected, but it is always smart to sit down and take a look at your needs annually. Make sure that you have the proper amount of coverage in all of the right places. For example, when it comes to life insurance, as your family grows it may be best to increase your amount of insurance to protect your loved ones. Additionally, although most people typically make changes to their wills after major life changes, more often than not other accounts get overlooked when it comes to those changes. Assets in retirement accounts pass directly to the beneficiaries that you designate within the account. Because of this, it is vital that you review your beneficiaries annually to be sure they are up to date.

Your investing goals might have changed.

Since our priorities change from time to time, during your annual financial review it is important to evaluate your current investment strategy. If things have changes, you can be sure to make adjustments as necessary. Even in times where your goals may have remained steady, it is vital to also look at different economic factors. Real estate conditions, interest rates and inflation, all determine whether your portfolio needs adjusting based off of those factors.

 

For more information on financial wellness check out The #AskTheAdvisor Show Episode 22

Majority of Americans Living Paycheck to Paycheck

Majority of Americans Living Paycheck to Paycheck

By Kristi Desepoli, Heritage Financial Advisory Group

Making ends meet seems to be a struggle for most people these days, no matter how much they seem to be earning.

According to a recent report from CareerBuilder, seventy-eight percent of full-time workers said they live paycheck to paycheck, which is up from seventy-five percent just last year. From a debt perspective, last year sixty-eight percent of U.S. workers overall said they were in debt, which has risen to seventy-one percent for this year’s research.  Only forty-six percent say that their debt is manageable, while fifty-six percent say they are in over their heads.

These issues are no stranger to those making over six figures either. About 1 in 10 of those making at least $100,000 said that they live paycheck to paycheck, with fifty-nine percent of them claiming to be in the red.

Most financial professionals would advise saving at least a six-month cushion for emergency purposes to take care of any unexpected expenses- such as car repairs or medical expenses. However, if you are a business owner or head of the household, six months may not be enough.  Household incomes have been growing over the past decade, however they have not been able to keep pace with the rise in cost-of-living expenses over that same time period.

What about savings?

Surprisingly, about fifty-six percent of people save $100 or less per month. Many claimed they have cut back on their 401k contributions and personal savings in the past year, with about one-third of workers who have not been putting money away for retirement at all.  Although not entirely to be blamed, personal responsibility has played a huge role in Americans’ financial problems.  The surveys have found that only one-third of workers actually stick to a budget.

With the statistics rising over time, it can be hard not to fear that these circumstances may affect your financial future. With a sound financial plan and a strategy to reach your goals, both present and future, you can feel confident that you are prepared for what lies ahead.

Backdoor IRA’s for High Income Earners

Backdoor IRA’s – The Dirty Little Secret

By this point in the year, most of us have filed our taxes and the 2016 tax year is behind us. Not many people have taxes on the mind and they will probably put off re-visiting the topic until next year, however; there is no time like the present to plan for how you can save on your future tax payments. If you are looking to pad your retirement savings, a backdoor IRA may be just the remedy for you.

What you need to know

Roth IRAs are a very popular and attractive investment vehicle for many reasons, and they are a great vehicle to facilitate a backdoor IRA.  The accounts are funded with after-tax dollars, withdrawals in retirement are tax-free, and any earnings in the account are tax-deferred.  Unlike the Traditional IRA, Roth IRAs are not subject to required minimum distributions during retirement, which makes them very appealing when it comes to tax planning.

Unlike with a Traditional IRA, there are income limits to opening a Roth IRA which has left many people earning high salaries believing it is not an option for them.  The law states that a single person with an annual adjusted gross income of $133,000 or more, and a married couple making more than $196,000 cannot directly fund a Roth IRA.  Despite this limitation, there have been no income limits placed on converting funds to a Roth IRA.  This allows for strategic planning to have more tax-free money available in retirement.  For high income earners, this is a fantastic planning tool.

How to do it

This work-around is called a “backdoor” approach.  Most high-income earners are most likely contributing the maximum allowances to their 401k plans. This means additional contributions can be made to a non-deductible Traditional IRA.  The backdoor approach would then have these investors turn around and move/convert those dollars to a Roth IRA.  Because the funds are coming from another retirement account, they are not considered to be a contribution.  The advantage to converting these funds is the tax-free growth that is provided in a Roth IRA. Deploying backdoor IRA’s is a little used strategy because it is widely unknown. Make sure to consult your finance and tax professionals before deploying this strategy.

For more information on this and other strategies for high earners, visit us here.

5 Cost Saving Tips for Business Owners

5 Cost Saving Tips for Business Owners

Every small business owner is concerned about retaining profit, and how to make their bottom line grow. One of the ways that small business owners are able to run their business in a profitable manner is by strategically apply cost-saving practices.

Here are five cost-saving tips for small business owners:
Seek Used Equipment

One of the big ways that businesses can save money is by purchasing used or refurbished.  When looking to replace electronics, such as a printer or copier, it is always smart to research refurbished options.  In most cases, these items have been repaired or had parts replaced, and typically come with some type of warranty.  When in the market for office furniture, there can be a huge price savings between new and used.

Teleconference

Meetings can be costly, and really add up quicker than you realize- especially when they aren’t local.  Rather than spend the extra money on travel and hotel-stay, opt for a teleconference.  Many different providers offer teleconferencing services- both for conference calls, as well as video.  This can be a great option to help save both money and time.

Reduce Paper Use

Not only is cutting down on paper use good for your company’s bottom line, but also for the environment.  A few ways to implement this includes: printing/copying double sided, reusing wasted paper for notes, and customizing margins to get the most printed on one page.

Pay Invoices Early

Many different vendors offer discounts to incentivize businesses to pay invoices early.  The most common offer would be a 2% discount off of the total when businesses pay in full within the first 10 days of the 30-day window.  This can provide a huge cost-savings to businesses.

Utilize Social Media for Advertising

In comparison to traditional advertising, such as television commercials and billboards- social media advertising can be just as effective and much more affordable.  The cost to run an ad can be significantly less expensive, and producing the ads is also relatively cheap.  It is also very popular to utilize social media for advertising without actually paying for promoted advertising space.  With time and effort, you can build a following organically to reach many current and prospective clients without actually spending any advertising dollars.

About the Author

Kristi Desepoli is an associate financial advisor at Heritage Financial Advisory Group. Heritage specializes in investment management and financial life planning for business owners, executives, and doctors.

 

 

6 Steps to Get Out of Debt

6 Steps to Get Out of Debt

Unfortunately there are no classes in high school or college that teach you how to pay off a loan or credit card, but there are plenty of companies out there willing to lend you the money you need for your next big purchase. Knowing that a portion of your hard earned money will be going towards digging yourself out of a hole instead of wealth preservation can be discouraging; but that doesn’t mean you can’t cover up that hole and walk away debt free.

Getting out of debt requires a plan and commitment. Here are six simple strategies to help you pay off any kind of debt:

Figure out how much you owe

Gather your statements, and log onto those accounts to see how much you owe for each account. Make a list of your accounts, the balances, and the interest rates being charged.

Rank your debts in order of size or interest rate

Next, you need to decide the order you want to pay off your debts. One strategy is the “snowball method.” This is where you start with your smallest debt, and work your way up to the bigger ones. The idea is that as you are able to check accounts off of your list as being paid off, you gain both a confidence and mental boost to keep on going. Another strategy would be to tackle the most expensive debt first. Find the account with the highest interest rate, and pay down that debt. Once that is paid, move onto the next highest interest rate, and so on. Doing this will ultimately have you paying less over the life of your loans.

Know how much you’re spending

It is important to know how much money you have coming in vs. how much money you have going out. After you have a good idea of the amount left over every month, it will be much easier to determine the amount you can comfortably devote to paying down your debt.

Allot cash for minimum payments

Although earlier we established what debt we would like to pay down first, we can’t forget that the rest of the accounts have the minimum payments that need to be made each month. It is important to take these minimum payments into account before allocating extra funds to the first debt on your list to pay off.

Automate your payments

Regardless of if you’re making a minimum payment or throwing extra money toward the debt to get it paid off, it’s always a good idea to make your payments automatic. It’s as simple as a few clicks online or a quick phone call to set up. Not only will you be sure not to miss a payment, but it’s a little bit easier to part ways with your money when you don’t have to manually make the payment every month.

Reduce your regular expenses

Many times we don’t know just how much we’re spending on certain things until it’s all laid out in a budget. Setting a limit to the amount of money you allocate to different categories on a monthly basis is a good way to free up extra cash to put towards your debt. It’s always a good idea to check back each month and see how you can improve your spending habits, and make any changes to better suit your needs. If you would like additional help on budgeting, you can find resources here.

About the Author

Kristi Desepoli is an associate financial advisor at Heritage Financial Advisory Group. Heritage specializes in investment management and financial planning for business owners, executives, and doctors.

7 Reasons a Roth IRA May Be for You

7 Reasons a Roth IRA May Be a Good Idea for You

By Mike Desepoli, VP of Heritage

 

It’s almost the tax filing deadline. During April, many people take advantage of the opportunity to reduce taxes by funding a Traditional IRA. While that makes sense for some Americans, others may benefit by contributing to a Roth IRA that offers no immediate tax break, but has other tax advantages, such as tax-free growth potential and tax-free income during retirement. Some people may realize the greatest benefit by having both types of IRAs.

Unfortunately, IRS contribution rules limit investors, who are younger than age 50, to making contributions of just $5,500 to all IRA accounts during 2015 and 2016. If you’re age 50 or older, you can save $6,500. Before making a 2015 contribution, consider the advantages of Roth IRAs, including:

Tax-free growth potential.

You won’t get a tax break today, but any earnings in a Roth IRA growth tax-free.

Tax-free income.

Distributions taken from a Roth IRA are tax-free, too, as long as certain requirements are met*. That means the income from your Roth IRA is protected from future tax increases.

No required minimum distributions.

You can leave the money in your Roth IRA until your heirs inherit it. You can’t do that with a Traditional IRA. At age 70½, you must take required minimum distributions (RMDs) from Traditional IRAs. Generally, RMDs are taxable and, if an RMD is not taken when it should be, a hefty penalty is assessed.

Penalty-free early distributions.

You don’t have to be age 59½ to take a penalty-free distribution from a Roth IRA as long as the distributions are used for higher education costs, qualified home purchases, unreimbursed medical expenses, or specific other expenditures.

Improved tax diversification.

When a portfolio is ‘tax-diversified,’ it includes taxable, tax-deferred, and tax-free accounts. Different types of accounts offer different kinds of benefits. For example:

  • Taxable accounts offer immediate access to funds. Money that is saved or invested in taxable accounts – like brokerage or banks accounts – have already been taxed and can be spent at any time.
  • Tax-deferred accounts offer tax breaks today. For instance, contributions to 401(k) and 403(b) plan accounts are made with before-tax money so the contributions are not included in taxable income today. The downside is IRS penalties may be assessed if the money in these plans is distributed before retirement. (Another potential benefit of tax-deferred accounts is employer-matching contributions, which can help you accumulate retirement assets more quickly.)
  • Tax-free accounts offer a tax break in the future. For example, contributions to a Roth IRA are made with after-tax dollars but any earnings grow tax-free and distributions may be tax-free. Having tax-free income during retirement may help you stay in a lower tax bracket.
Open an account at any age.

Anyone, of any age, who has earned income, can open a Roth IRA. So, you can fund a Roth IRA for yourself any time. You can also fund one for a child or grandchild who works, and give him or her a head start on saving for retirement.

Contribute as long as you work.

While contributions to Traditional IRAs must stop at age 70½ (when RMDs begin), that is not the case with Roth IRAs. As a result, Roth IRAs provide legacy and estate planning advantages Traditional IRAs do not.

 

If you’re planning to open or fund an IRA before April 15 for yourself or someone you love, and you’re not certain whether a Traditional or Roth IRA is the right choice, talk with your financial professional. He or she can review your portfolio and help determine which may best suit your needs.

To find out if a Roth IRA is right for you, talk with a financial advisor today.