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.

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.

How To “Spark Joy” In Your Finances

Get Your Financial House in Order


“Does this spark joy?”

Marie Kondo

Millions of people are asking themselves this question about their homes and possessions thanks to Marie Kondo and her wildly popular decluttering philosophy.

Once the kids are moved out, it’s just you, your spouse, and whatever is still boxed up in extra bedrooms and the basement. Whether you’re looking for joy or just a little less space and stuff to manage, you might be thinking about decluttering and “downsizing” into a smaller home before you retire.

But sometimes less can be more: more hassle, more complicated, and more expensive. Before you and your spouse order that dumpster and make a down payment on that condo, consider these important pros and cons of downsizing.

PRO: Make a change while you can still enjoy it.

The younger you are during a downsize, the less help you’re going to need clearing out what you don’t want and relocating. And a clean, organized home can be a great “blank slate” as you start easing into your new life. You might even organize a move around interests you want to pursue in retirement, like a community with golf and tennis facilities, or a burgeoning foodie hotspot with an exploding restaurant scene.

CON: You might make a change you don’t both enjoy.

Couples need to be very clear with each other about their expectations for what life is going to be like in retirement, and how each of you want to spend your time separately and together. A downsizing that moves you to a new town, away from friends, family, and familiar comforts, can go from exciting to exasperating very quickly if both spouses aren’t committed to adventuring together. One spouse might be happily teeing off while the other is puttering around the house bored silly.

And while a smaller house without kids and clutter might mean more room for you and your spouse, it’s still going to be closer quarters than you’re used to. Is less space going to provide you both with enough personal space?

PRO: Simplified living.

A smaller home means less upkeep. If you buy, you’ll probably pay less in taxes than you did at your larger house. With less space to heat and cool, and no kids soaking up extra water, food, and electricity, your monthly bills might go down. If your smaller house is relatively new, it might require less upkeep and age well right along with you.

CON: Simple isn’t free.

There’s a pretty good chance your current furniture isn’t going to fit or fit in at your new house. Our old stuff is never as valuable to resellers as we want it to be, so you’ll probably end up dipping into your nest egg to buy new furnishings. Anything you don’t want to get rid of you’re going to have to store, either in that beautiful, empty basement, or at a storage facility you’ll have to pay for. If you move to a different state, your smaller home might come with higher taxes. What you save on taxes buying a condo might be offset by association and communal maintenance fees.

PRO: Living the best life possible with your money.

The best reason to consider downsizing doesn’t really have anything to do with decluttering. It’s not about managing space or what to do with all your possessions.

No, the reason to downsize is because that smaller home you’re thinking about will allow you to live the life you want to live in retirement. It’s because that home is going to give you the space to do the things you want to do with the people you love, while minimizing the things you don’t want to do anymore.

Does that idea spark joy?

Then let’s talk. Come in and tell us why you’re thinking about downsizing. We’ll run some numbers and discuss how a new, smaller home could open a big new world of possibilities for you and your spouse. 

How Does Your Retirement Savings Compare?

“How am I doing?”

-Every Investor…..ever

Ever wonder how your retirement savings stack up against other people your age? That’s a big question that most people have when it comes to their money. One way we tend to look for answers is by comparing what we have to what our neighbors, friends, and family, have. Even though we know deep down that “the grass is always greener on the other side,” it can be hard to look away when our phones, computers, and TVs are practically forcing us to make these comparisons.

We understand the worry that you might not be keeping pace with your peers. But if you’re wondering about where your retirement savings “should be,” it’s important that you look at these numbers with the proper context.

The numbers.

According to Nerdwallet, here’s how average retirement savings break down by age:

Under 35

Average household retirement savings: $32,500

Median household retirement savings: $12,300

Ages 35 to 44

Average household retirement savings: $100,100

Median household retirement savings: $37,000

Ages 45 to 54

Average household retirement savings: $215,800

Median household retirement savings: $82,600

Ages 55 to 64

Average household retirement savings: $374,000

Median household retirement savings: $120,000

Ages 65 to 74

Average household retirement savings: $358,400

Median household retirement savings: $126,000

As you might have guessed, retirement savings tend to ramp up as we age. In part, this is because the older we get, the more real retirement becomes, and more prepared we want to be.

But as fiscally responsible people age, their debt level tends to drop as well. No more kids to support. No more student loan payments. Vehicles and houses get paid off. Credit cards get used less (unless you’re focused on accumulating points) and paid down. There’s only so much you can keep in a low-interest savings account before you want to put more of your money to work.

The numbers behind the numbers

If these figures seem a bit low to you, you’re not wrong. Most financial experts believe that, generally, Americans are not saving nearly enough for retirement.

Yes, having a couple hundred thousand in savings and investment accounts may sound like a lot of money. But people are also living longer and more active lives than ever before. That means your retirement assets are going to have to last longer than your parents’ and grandparents’ did.

And as pensions continue to dry up, the responsibility for preparing for retirement has shifted more and more to individuals. That’s going to be a challenge for anyone who’s significantly below these savings levels. And it’s going to be a BIG problem for the 43% of households headed by someone 35-44 who don’t have any retirement savings at all.

Is an “average” retirement good enough?

Let’s say you’re the average 65-year-old with just over $300,000 in the bank. How long is that $300,000 going to last? Is that nest egg going to provide the retirement you’ve been dreaming about and working for most of your life?

There’s no one-size-fits-all answer to those questions. We all have different passions, goals, healthcare needs, and lifestyle expectations. Some retirees might live quite happily at or even a little below the average level.

But what happens if your spouse has an accident and needs to see a specialist? What if your roof needs a major repair? Will an emergency stretch your “average” retirement too thin?

What happens if, five years into a twenty-year retirement, you start to feel bored and restless? What if you decide you need to see more of the world? What if you can’t let go of that passion project you’ve always wanted to develop into your own business? Will your nest egg provide for changes that will make your retirement more fulfilling?

How your money measures up.

Successful retirement planning balances the things that we can anticipate with the things we can’t. That’s why, as we work together, we’ll never hold up a graph comparing where your money is to where your peers are. We’re not interested in outside standards of “measuring up.” We’re interested in how your money measures up to what YOU want out of life, and what you’ll need to stay comfortable on rainy days.

Contact us to review your saving plan and spending levels. We can help you adjust as necessary to make sure that both are on track to hit the standard that matters most: yours.F

Source

https://www.nerdwallet.com/article/the-average-retirement-savings-by-age-and-why-you-need-more

Financial Planning is About Making Your Life Plan A Reality

Many folks who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about IRAs, 401(k)s, or how much you’re saving. Instead, we begin by talking about you, not your money.

Putting your life before your financial plan.

As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.

Our job is to build a financial plan that will help you make your life plan a reality.

Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets and doing what we can to maximize your return on investment.

But we believe maximizing your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.

Feeling free.

One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next dollar, you’ll start exploring what more you can get out of life than just more money.

Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.

Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.

The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.

And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.

What’s coming next?

So, when does the planning process end?

If you’re like most of the people we work with, never.

Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.

Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.

Some transitions we’ll be able to anticipate, like a child going to college, a big family vacation you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big out-of-state move for work, we’ll help you adjust for as necessary.

In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.

Planning for and reacting to these moments where your life and your money intersect is what we do best. Come in and talk to us about how Life-Centered Planning can help you get the best life possible with the money you have.  Visit Our Website to learn more.

We also have some really great resources on our YouTube Channel, so head on over there to check it out.

How To Test Drive Retirement

Want to Retire? Take It for a Test Drive

There are many reasons why people who could retire are hesitant to do so. Some people think they need to wait until they’re 65 or older. Some are worried about running out of money. Many parents want to keep supporting their children through some major life transition, like college, marriage, or buying a first home. 

Maybe the most common reason we see for a retirement delay is folks who just can’t imagine their lives without work. That’s understandable. A routine that’s sustained you and your family for 30 or 40 years can be a hard routine to shake. 

But retirement doesn’t have to be all or nothing right away. If just thinking about retiring makes you jittery, use these tips to ease into retirement a little at a time. 

1. Talk to your family.

Clear, open communication is an essential first step to approaching retirement. Be as honest as possible about what you’re feeling. What worries you about retirement? Does the idea excite you? What do you envision your days being like? Where do you want to live? What does your spouse want retirement life to be like? 

2. Talk to your employer.

Many companies have established programs to help longtime employees transition into retirement. You might be able to trim back your hours gradually to get an idea of what days without working will be like. You’re also going to want to double-check how any retirement benefits you may have are going to work. Discuss any large outstanding projects with your supervisor. Make a plan to finish what’s important to you so that you can leave your job feeling accomplished. 

Self-employed? Give your favorite employee (you) less hours and fewer clients! Update your succession plan and start giving the soon-to-be CEO more of your responsibilities. Make sure you have the absolute best people working for you in key leadership positions so that your company can keep prospering without your daily involvement. 

3. Make a “rough draft” of your retirement schedule. 

What are you passionate about? What are some hobbies you’d like to develop into a skilled craft? Do you want to get serious about working the kinks out of your golf swing? Are there household projects, repairs, or upgrades you want to tend to? A crazy idea you kicked around at work you’d like to build into a new company? A part-time job or volunteer position you’d like to take at an organization that’s important to you? New things you want to try? New places you want to visit? Grandkids you want to see more often?

Try filling out a calendar with some of your answers to these questions. As you start to scale back your work hours, take a few lessons or volunteer shifts. Sign up for a class. Leave town for a long weekend. See what appeals to you and what doesn’t. 

Remember, you don’t have to get your schedule right the first time! A successful retirement will involve some trial and error. Learn from things you don’t like and make a point to spend more time doing the things you do like. 

4. Review your finances. 

This is where we come in! 

Once you and your spouse have settled on a shared vision for retirement, we can help you create a financial plan to help ensure you are financially fit for (semi)-retirement. We’ll go through all of your sources of income, retirement accounts, pensions, savings, and other investments to lay out a projection of where your money is coming from and where it’s going.

We can coordinate all aspects of your situation and collaborate with you on the best course of action. You don’t have to face retirement alone and make big decisions without expert guidance. 

Coming in and talking to us about your retirement is a great “Step 1” option as well. So if you are dreaming of those days when work is optional, give us a call and we can help you through this phase of life.

For more retirement resources check out some of our other blog posts.

For more help with retirement, the AARP website can be a great resource as well.

3 Life Insights from the Jeff and MacKenzie Bezos Divorce

One of the reasons that divorce is such a challenging life transition is its public nature. A couple might keep their problems private as they try to work through them. But if a rift opens that can’t be mended, the couple will have to share some very difficult news with friends and family as they separate from one another.

Few of us will have to reveal emotional personal issues to as wide an audience as Jeff and MacKenzie Bezos recently did. The statement that Jeff released on Twitter suggests that he and MacKenzie are trying to make their split as amicable as possible by using three insightful ideas that could help anyone struggling through a divorce.

1. Be open and honest with those closest to you.

“We want to make people aware of a development in our lives. As our family and close friends know, after a long period of loving exploration and trial separation, we have decided to divorce and continue our shared lives as friends.”

Couples need privacy as they deal with strains on their marriage. But once a decision is made, clear communication with your family, friends, and each other will be very important. That goes double if any young children are in the picture.

The more open a couple is about what’s happening, the easier it will be for you to find the outside support that will help you through this transition. Good dialogue might also help you and your former spouse to focus on the essential tasks at hand, like dividing your assets and updating your essential estate planning documents.

2. Be grateful.

“We feel incredibly lucky to have found each other and deeply grateful for every one of the years we have been married to each other. If we had known we would separate after 25 years, we would do it all again.”

Shame, embarrassment, and guilt are common feelings associated with divorce. Playing the blame game or trying to “win” the divorce can quickly turn all those amicable best intentions into bitter personal and legal issues.

Instead, the Bezos statement is a reminder that the end of a marriage – especially a long one – doesn’t erase all of the positive things that came before it. If an amicable divorce is possible in your particular situation, then don’t be ashamed or embarrassed. Cherish those precious shared experiences, like the birth of children, happy vacation memories, the difficult times you helped each other through. Embracing these feelings of gratitude will help ease both you and your partner through this process.

3. Focus on the positives ahead.

“We’ve had such a great life together as a married couple, and we also see wonderful futures ahead, as parents, friends, partners and ventures and projects, and as individuals pursuing ventures and adventures.”

When we work through the $Lifeline exercise, we emphasis that important transitions like retirement, children graduating, weddings, and yes, divorces, are ends in one respect, but also new beginnings. They’re the start of new chapters in your life.

That might be difficult to see when the pain of a divorce is still raw. But it’s important to open yourself up to new opportunities when they present themselves. You’re about to start your single life all over again. And yes it’s scary. It may not be what you wanted. And you may be bitter. But over time, you may be able to see what awaits you on the other end. It could be traveling that you’ve longed for. Maybe you’ll relocate, start a new career, begin new hobbies, and meet new people. You might have more financial resources at your disposal to explore solo than you did when you were younger and unmarried. And you might approach these experiences with a more mature and grateful perspective, enjoying every minute just a little bit more fully.

We want to help you through all of life’s major transitions, the positives as well as the challenges. If there’s change on the horizon, make an appointment to come in and review the $Lifeline exercise with us. We can help you plan ahead so that the next chapter of your life is the most fulfilling yet.

Is How You Use Your Money Aligned With Your Values?

Is How You Use Your Money Aligned With Your Values?

By Mike Desepoli, Heritage

A hamster in a wheel.

Have you ever watched a hamster running in a wheel? All that running, all that effort, day after day after day … But the poor little critter never really gets anywhere, does he?

Many of us feel the same way about our money.

More specifically, we feel that way about the work we do to get that money. We spend forty hours every week on a wheel, running after a paycheck. And then, first thing Monday morning, we’re back on the wheel, and the whole thing starts over again.

Many folks just keep repeating this cycle, over and over, until they finally retire. They think that stepping off the wheel just isn’t an option because they have bills to pay, college expenses to save for, and a dream to be “financially set” before retiring from work. It begs the question if he we use our money is aligned with our values.

How much is enough?

These are all persuasive arguments that keep people on the wheel. And the hope is that someday, you’ll be able to stop running and enjoy the fruits of all that hard work.

Unfortunately, more often than not, “someday” never comes. If your focus in your work and in your financial planning is just having enough money, you’ll never feel like you have enough. There’s always another dollar to chase, another way to economize so that you can save more.

But for what? Is having more and more money, in and of itself, something that you really value? Does having more make running on the wheel worth it?

You might think that this “never enough” mentality ends once a person retires. In fact, it just transitions into a new, related worry: “Am I going to run out of money?” Again, that “someday” gets pushed back in favor of more saving, more super-conservative living. You might not be working any more, but you’re still just chasing after money.

The wind in your sails.

At the end of the day, your money is not the shore we’re sailing for. It’s not the sea you’re sailing on. It’s not even the boat you’re steering.

Your money is the sail. It’s the tool you use to get where you want to go.

And the wind in that sail is your values.

Just like a good sailor learns how to maneuver the sails to catch the most wind, aligning what’s most important to you with your financial resources is the key to successful financial planning.

So instead of asking yourself if you have enough money, or if you will run out of money, ask yourself a better question:

Am I managing my money in a way that’s improving my life?

We don’t want you just to “have enough money.” We want you to live the best life possible with the money you have.

That starts with thinking about what’s really important to you. The people whom you love. The causes that are dear to your heart. The activities that keep you feeling fit and full of energy. The hobbies that put your unique skills to their highest uses. The opportunities for learning and self-discovery that enrich your understanding of the world and of yourself. The wisdom that you will pass down to your children and grandchildren so that they live their best possible lives as well.

We believe that aligning your financial plan with these values is every bit as important as analyzing your tax situation or managing your investments. Come in and see how our interactive tools can you help plan for your whole life and get more from your money than just more money.

For more resources to help you align your money with your goals, and increase your return on life visit our video library.

How Are You Feeling About Financial Markets?

How Are You Feeling About Financial Markets?

Heritage Insider Weekly November 12, 2018

Some votes are still being counted but investors appear to be happy with the outcome of mid-term elections. Major U.S. stock indices in the United States moved higher last week, and the American Association of Individual Investors (AAII) Sentiment Survey reported:
 
“Optimism among individual investors about the short-term direction of stock prices is above average for just the second time in nine weeks…Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.4 percentage points to 41.3 percent. This is a five-week high. The historical average is 38.5 percent.”
 
Before you get too excited about the rise in optimism, you should know pessimism also remains at historically high levels. According to AAII:
 
“Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.3 percentage points to 31.2 percent. The drop was not steep enough to prevent pessimism from remaining above its historical average of 30.5 percent for the eighth time in nine weeks.”
 
So, from a historic perspective, investors are both more bullish and more bearish than average. If Sir John Templeton was correct, the mixed emotions of investors could be good news for stock markets. Templeton reportedly said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
 
While changes in sentiment are interesting market measurements, they shouldn’t be the only factor that influences investment decision-making. The most important gauge of an individual’s financial success is his or her progress toward achieving personal life goals – and goals change over time.
Let’s take a look at some performance figures…

Data as of 11/9/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor’s 500 (Domestic Stocks)
2.1%
4.0%
7.6%
10.2%
9.4%
11.7%
Dow Jones Global ex-U.S.
-0.3
-11.7
-9.4
3.2
0.3
4.7
10-year Treasury Note (Yield Only)
3.2
NA
2.3
2.3
2.8
3.8
Gold (per ounce)
-1.7
-6.6
-5.7
3.6
-1.1
4.9
Bloomberg Commodity Index
-1.2
-6.0
-5.2
-0.5
-7.7
-4.4
DJ Equity All REIT Total Return Index
3.5
2.3
1.2
8.2
9.6
13.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
 
is A Zeal of zebras a better investment than a blessing of unicorns? 
Collective nouns are the names we use to describe collections or significant numbers of people, animals, and other things. The Oxford English Dictionary offered a few examples:
 
  • A gaggle of geese
  • A crash of rhinoceros
  • A glaring of cats
  • A stack of librarians
  • A groove of DJs
 
In recent years, some investors have shown great interest in blessings of unicorns. ‘Unicorns’ are private, start-up companies that have grown at an accelerated pace and are valued at $1 billion.
 
In early 2018, estimates suggested there were approximately 135 unicorns in the United States. Will Gornall and Ilya A. Strebulaev took a closer look and found some unicorns were just gussied-up horses, though, according to research published in the Journal of Financial Economics.
 
The pair developed a financial model for valuing unicorn companies and reported, “After adjusting for these valuation-inflating terms, almost one-half (65 out of 135) of unicorns lose their unicorn status.
 
Clearly, unicorn companies must be thoroughly researched. There is another opportunity Yifat Oron suggested deserves more attention from investors: zebra companies.  Oron’s article in Entrepreneur explained:
What is a unicorn company?
 
“Zebra companies are characterized by doing real business, not aiming to disrupt current markets, achieving profitability and demonstrating it for a while, and helping to solve a societal problem…zebra companies…are for-profit and for a cause. We think of these businesses as having a ‘double bottom line’ – they’re focused on alleviating social, environmental, or medical challenges while also tending to their own profitability.”
 
Including both types of companies in a portfolio seems like a reasonable approach.
 
If you were to choose a collective noun to describe investors, what would it be? An exuberance? A balance? An influence?
 
Weekly Focus – Think About It
 
“In his learnings under his brother Mahmoud, he had discovered that long human words rarely changed their meanings, but short words were slippery, changing without a pattern…Short human words were like trying to lift water with a knife.”
–Robert Heinlein, American science fiction writer
 
Have a great week.

Did You Inherit Your Beliefs About Money From Your Parents?

Did You Inherit Your Beliefs About Money From Your Parents?

Lou Desepoli, Heritage Financial Advisory Group

Parents know that children hear, see, and pick up on everything that is going on with the adults in their lives. And when you were a child, you were no different.

Our attitudes about money are formed at an early age, as we absorb how people around us deal with money. Some of these beliefs, such as a commitment to disciplined saving, are positive. Others, like skepticism about the stock market, can be more harmful than helpful as we try to build wealth in our own lives.

Answering these four key questions can help you look at your financial upbringing with a fresh perspective. When you’re done, think about which money beliefs you want to pass on to your own kids, and which might be preventing you from living the best life possible with the money you have.

  1. What was money like growing up?

Your childhood experiences of money are a composite of details both big and small.

You probably compared the comforts of your home to what you saw next door and drew some conclusions about how comfortable your family was.

Did your parents get a new car every couple years or drive around the same station wagon until it died? Did you take frequent vacations? What were holidays and birthdays like?

Watching mom and dad carefully balance their checkbooks or set next week’s grocery budget also might have made a strong impression. And at the more serious end of the spectrum, an unexpected job loss, debilitating medical condition, or death could have had a profound impact on your family’s finances.

  1. What was money like for your parents growing up?

Many baby boomers were raised by parents who had to tighten their belts during the Great Depression and World War II. The Greatest Generation probably impressed upon your parents the value of the hard work, the importance of saving, and perhaps some real apprehension when it comes to money. Your parents may have passed on these same values to you, or swung in the opposite direction and tried to make money as stress-free as possible.

How much do you know about your parents’ childhoods? If they’re still living, ask some questions that will fill in your family’s history a little more clearly. You might learn something surprising. And you might gain some insight into how their experiences of money are still affecting you.

 

  1. What specific lessons were you taught that you have continued?

People who grow up in working-class households often learn negative lessons about wealth. Their parents may view affluent people with suspicion or even resentment. Sometimes there are valid reasons for these views. In other cases, hard-working adults see greener grass on the other side of the fence. They underestimate how much hard work and discipline really go into wealth-building. Their kids learn to do the same.

On a more positive note, your parents also made decisions that taught you what was more important. Perhaps they sacrificed their own leisure and comforts so that you could attend a good private school. A parent might have earned a modest living as a teacher or working for a nonprofit that made your community better.

  1. What was the best thing you were taught about money?

As a child you probably rolled your eyes whenever your parents doled out maxims about money or started reminiscing about what money was like when they were growing up.

Now that you’re the one doing the earning, some of those lessons probably ring true. “Live on less than what you make” is hard to hear when it’s used to explain why you can’t have a new bike or take a big vacation. No child wants to sacrifice their weekends or summers working part time because their parents insist on it. But the lessons that were hard to swallow when we were young. These are the lessons that often create attitudes and habits that benefit us as adults.

The sum of all these memories, the positive and the negative, is a blueprint to your financial thinking. It’s also the schematic that we use to build your life-centered financial plan. Come in and share your blueprint with us so that together, we can lay a strong foundation for your family’s future.

For more information about this topic or any others, reach out to us by clicking here.

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.

5 Next Steps When You Are Concerned About Aging Parents

5 Next Steps When You Are Concerned About Aging Parents

As your aging parents begin to settle into their final phase of life, their health, residence, and finances could become a factor in your retirement planning. This is especially true if you are the person your parents have tasked with settling their estates.

There’s no simple way to tackle all the logistical and emotional challenges associated with caring for an aging parent. But these five steps will help you get the help you’ll need to make sure your parent is safe, cared for, and financially secure.

  1. Call a family meeting.

No two families are the same, but in most cases, you’re going to want to gather together all siblings and close family members for an open and honest discussion. If your parent is dealing with a serious and potentially debilitating health issue, don’t sugar-coat the truth. Hiding the facts now will only lead to hurt feelings, resentment, and poor planning.

Depending on the parent’s condition, you might consider dividing up a caregiving or visitation schedule. Even pitching in on small day-to-day tasks like helping mom or dad buy groceries can be a big help.

If you’re contemplating a more serious decision, like assisted living, make sure you give everyone space to voice an opinion. Try to keep the conversation as positive and solution-focused as possible. Employing a mediator or family counselor to facilitate might be a good option if you’re concerned old family issues could boil over and prevent a solid resolution.

  1. Don’t try to parent.

Shifting from the role of adult child to caregiver is going to be a difficult transition for both you and your parent. Don’t try to do too much too soon. Seniors who feel like they’re being “babied” are prone to depression or dangerous outbursts of independence, like grabbing the car keys or refusing to take medication.

A better approach is to try to frame your caregiving as a way of being more involved in your parent’s current routine. Take a seat at dad’s weekly card game. Put the grandkids’ sports and performance events on the calendar and offer transportation. Bring an extra dish to a dinner party. Drive mom to the movies … and let a sibling know the house will be unoccupied for a few hours if there are any cleaning or hoarding issues that need attention.

  1. Gather the essentials.

If your parent doesn’t keep all important documents in one location, now is the time to collect, copy, and file things like:

  • Identification (driver’s license, passport, birth certificate, marriage certificate, etc.)
  • Bank records
  • Home deeds and vehicle titles
  • Insurance records
  • Investment and retirement account records
  • Wills and trusts
  • Power of attorney
  • End of life directives
  • Login information for important online accounts (banking, subscriptions, social media)

There may be other documents that are unique to your parent’s living or financial situation. We can help you make a comprehensive list.

  1. Tag along.

Start attending doctor’s appointments. Don’t be afraid to ask questions that will help you familiarize yourself with your parent’s medical condition and aid with any at-home care like prescription drugs.

Also ask your parent to introduce you to his or her financial advisor and attorney. Make sure the relevant professionals have all important information about changes to your parent’s health, mental capacity, or living situation.

  1. Plan for the next steps.

At some point, your aging parent may no longer be self-sufficient. The earlier that you and your close family members decide upon an action plan, the better. Do you or anyone in your family have the room, the time, and the means to take in your parent? How can non-caregiving siblings or other family members chip in on associated costs of living?

In many cases an assisted living facility is a more realistic option. But be aware that your parent’s Medicare plan probably will not cover those costs. If your parent does not have retirement funds earmarked for end-of-life care, you and your close family members may need to hold another meeting to discuss how to pay for a facility.

None of these steps are easy, and none of the associated options your family settles on will be perfect. The sooner you loop us in on how caring for an aging parent might affect your financial picture, the sooner we can get to work on the money side so that you can concentrate on giving your family the love and support it needs during this difficult time.

4 Things to consider Before Financially Bailing Out Your Children

4 Things to Consider Before Financially Bailing Out Your Adult Children

Mike Desepoli, Heritage Financial Advisory Group

According to a recent study by TD Ameritrade, 25% of baby boomers are supporting their family members financially (1). Support to adult children averages out to $10,000 per year. That’s $10,000 that boomers aren’t saving, contributing to retirement accounts, or investing.

Can your retirement afford that kind of generosity?

If you fall short of your retirement goals, is the adult you’re bailing out going to bail you out during your golden years?

Before you write your struggling young adult another big check, ask yourself these four key questions:

  1. What, specifically, is this money for?

The key word here is SPECIFICALLY.

Many parents tend to err on the side of protecting their child’s feelings when weighing financial support. We know asking for money can be embarrassing, and we don’t want to deepen that embarrassment. Or we’re worried that if we ask too many questions the child will become frustrated and hide serious problems from us going forward.

These are understandable concerns. But it’s also important that you understand whether your child needs support because of something beyond his or her control (a car accident, serious health issues, unexpected job loss) or because they’re struggling with basic adult responsibilities. If your child is making poor budgeting decisions or settling for underemployment, you may be throwing good money after bad.

Be tactful, but get to the root problem before you decide if your money is the best solution.

  1. What is the real cost to me?

Many parents are already helping their adult children more than they realize.

For example, you might not think much of letting your adult children stay on the family cell phone plan or piggyback on an HBO subscription. After all, it’s only twenty bucks a month, right?

But how long have you been giving your child that monthly free pass? Years? You can also set time limits. For example, tell your child they can remain on the family cell phone plan until age 25 or until they get married, whichever comes first.

 

Are you helping with larger monthly expenses, like student loan or car payments? When will it finally be time to pull the plug?

Our advice: get it all down on paper. Make a spreadsheet that accounts for the financial support you’re already giving your child, large and small. Seeing how even small expenses accumulate over time will be eye-opening for both of you and help inform a good decision.

  1. What are the terms of the bailout?

This is another area that parents tend to tiptoe around because they’re afraid of insulting their children. But do you know of any bank that’s going to loan your kids money indefinitely, charge no interest, and ask for no repayment? Then why should your money be subject to such lousy terms?

Your children have to understand that your generosity is not open-ended, especially as you near retirement age. You’ve probably made many sacrifices for them already. You should not sacrifice your financial security or the nest egg that is meant to support you in retirement.

If your children want you to “be the bank,” then you have every right to act like one. Set clear terms in writing, including a repayment schedule. In more serious cases, you might want to bring us a copy of this agreement so that we can include it in your estate plan.

  1. How else can I help?

It’s very likely that your child spent 16 or more years in school without learning a single thing about managing money. Financial literacy just isn’t taught in schools. This knowledge gap could be a big reason your young adult is struggling.

A BMO Wealth Institute survey found that two-third of parents give money to adult children when a sudden need arises (2). Does your child need money suddenly because he or she doesn’t know how to budget? Help find that balance between covering current expenses and contributing to savings and investment accounts.

Housing and transportation expenses can be a shock to recent college grads. You could help your child negotiate a car lease. You might help a child who’s already chasing after the Joneses by counselling against a rash home purchase that will stretch his or her finances thin.

Introducing your underemployed child to some of your professional connections might lead to a significant career upgrade.

One key connection you should be sure to tap: your fiduciary advisor! We’re always happy to help our clients’ adult children get on their feet. We consider this a service to our clients because we know that the less you’re worried about supporting your children, the more secure your own retirement goals will be.

 

Sources
  1. https://s1.q4cdn.com/959385532/files/doc_downloads/research/TDA-Financial-Support-Study-2015.pdf
  2. https://wealth.bmoharris.com/media/resource_pdf/bmowi-bank-of-mom-and-dad.pdf

How to Have More Fun and Meaning When You Retire

How to Have More Fun and Meaning After You Retire

Lou Desepoli, Heritage Financial Advisory Group

A blank calendar filled with nothing but free time can be every bit as stressful as a packed work week.

That’s the surprising fact that many people who retire confront after a few days of hitting the snooze button and puttering around the house. This is usually when the reality of retirement sets in. This is your life now. What are you going to do with it?

Whatever you want!

The only thing better than sleeping in is jumping out of bed early because you’re energized and excited for the day ahead. This is the kind of active and fulfilling retirement that we love to help our clients prepare for.

Here are some ideas for creating a new retirement schedule that will keep you growing, learning, experiencing new things, and making meaningful connections with your community.

  1. Travel.

Taking all those trips you couldn’t squeeze in around work meetings and kids’ baseball tournaments tops many retirements wish lists. And with good reason. After all that hard work, prudent planning, and disciplined saving, you deserve to treat yourself, do things you never had time for, see places you’ve always wanted to see.

Why not try to be your own travel agent? Planning a few big trips scattered throughout the year can be a fun activity for you and your spouse to do together. And in between those big destination vacations like a river cruise in Europe, you can sprinkle in some long weekends visiting the grandkids, and a few separate getaways to give each of you space to pursue your personal passions.

  1. Work or volunteer part time.

No, “working in retirement” is not an oxymoron. More and more retirees who can afford to stop working are taking part-time jobs and volunteer positions. This can give your week some welcome structure and provide an outlet for things you’re passionate about.

That non-for-profit job you couldn’t afford when you were raising kids and paying a mortgage? Take it. Do some good in your community and make a little spending cash on the side. Put your cultural expertise to work as a docent for an art gallery or museum. Volunteer at a church or charitable organization that’s close to your heart.

  1. Upgrade your living situation.

Whether you’re handy and enjoy doing the work or just like picking out new colors, patterns, and fixtures, take care of all those lingering household projects. Your comfort is important, especially as you age. Don’t let minor inconveniences like leaky faucets and spotty heating turn into major problems. Get rid of that lumpy mattress and hard couch you’ve been torturing yourself with for a decade. Map out the deck and pool you’ve always wanted and turn your backyard into a central hangout for your family and friends.

Of course, that’s assuming you want to “retire in place” at your current residence. A permanent change of scenery can be invigorating as you enter this new phase in your life. Just make sure you talk to us if you see a new beachfront condo in your future. We’ll make sure to incorporate the move and all the necessary tax, health care, and cost of living adjustments into your financial plan.

  1. Get really good at something you love doing.

Been a frustrated weekend golfer your whole life? Sign up for lessons and get that handicap down for good. What better time than when you retire? Or better yet, set up a weekly tee time with a group of retired friends. No more rushing through meals on your way to and from work and school, so let your inner foodie have the run of the kitchen. Dust off your college French lessons before that dream trip to Paris with an online class. Clear out that back bedroom no one uses any more and make a study. Paint the pictures you’ve always wanted to paint. Finish the novel hiding in the bottom of your desk drawer.

The possibilities for an exciting and fulfilling life in retirement are bound only by your imagination and the financial resources you have available to you. Let us help you take care of the money part so you’re free to focus on the fun.

For more retirement resources check out our YouTube Channel

Let’s Talk Turkey!

Let’s Talk Turkey!

 

So, how did Turkey, a country that represents just about 1.4 percent of the world’s economy spark a global selloff?

 

Turkey was once a rising star. The country’s Prime Minister Recep Tayyip Erdogan took office in 2003 and his “conservative, pro-business policies helped pull the country back from an economic crisis,” reported Financial Times.

 

As Turkey’s economy strengthened, investors saw opportunity. Investments from outside the country averaged about $13 billion a year, according to World Bank figures cited by Financial Times, although investment slowed after terror attacks in 2015.

 

Bloomberg reported Prime Minister Erdogan has become more authoritarian since being re-elected in 2018, giving himself power to name the head of Turkey’s central bank. Financial Times reported the Prime Minister’s “…unorthodox views on interest rates…has proved disruptive for monetary policy, leaving…Turkey’s central bank, struggling to contain inflation that is running at close to 16 percent.”

 

Lack of central bank autonomy concerned investors. The Turkish lira began to weaken against the U.S. dollar, making it costly for businesses to repay dollar-denominated debt.

 

Politics have factored into the situation, as well. During 2018, negotiations were underway to secure the release of an American pastor who was arrested on “farcical terrorism charges,” reported The Economist. However, talks collapsed early in August. Asset freezes and sanctions followed, along with promises of additional tariffs on Turkish goods imported by the United States.

 

The subsequent steep drop in the value of Turkish lira sparked concerns that rippled through global markets. Financial Times reported:

 

“Turkey’s deepening crisis punished emerging market currencies and sparked a global pullback from riskier assets on Friday…The S&P 500 fell 0.7 percent in New York on Friday. Treasury yields also moved lower, with the 10-year dipping below 2.9 percent for the first time this month, as investors sought safe assets…Investors’ shift from risky assets knocked equities across Europe, with Germany’s Dax, France’s CAC 40 and Spain’s Ibex all about 2 percent weaker.”

 

For quite some time, investors have appeared immune to geopolitical risks. Perhaps that is beginning to change.

 

 

Data as of 8/10/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.3% 6.0% 16.2% 10.4% 10.9% 8.1%
Dow Jones Global ex-U.S. -1.5 -5.5 1.7 2.9 2.6 1.1
10-year Treasury Note (Yield Only) 2.9 NA 2.2 2.2 2.6 4.0
Gold (per ounce) -0.2 -6.3 -5.5 3.5 -2.0 3.6
Bloomberg Commodity Index -0.8 -4.5 0.8 -3.1 -7.9 -7.7
DJ Equity All REIT Total Return Index -1.5 1.7 5.8 7.7 9.2 7.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

 

 

3 things to consider Before claiming social security benefits: timing, spousal benefits, and work status.

Most Americans understand they can choose when to begin receiving Social Security benefits. The choices are fairly straightforward:

 

  • Early (age 62 to full retirement age). People who decide to collect benefits early typically receive a smaller monthly benefit than they would if they waited until full retirement age. The reduction in monthly income may be as large as 30 percent. However, they receive benefits for a longer period of time.

 

  • Normal (full retirement age). An American’s full retirement age is determined by his or her date of birth. For someone born in 1960 or later, full retirement age is 67 years. The amount of income a person receives at normal retirement age is determined by the amount earned during his or her working years.

 

  • Delayed (after full retirement age to age 70). By delaying the start of Social Security benefits, a person can increase his or her monthly benefit by accruing delayed retirement credits. For Americans born in 1943 and after, credit accrues at a rate of 8 percent each year.

 

While it’s important to understand timing options for Social Security benefits, choosing when to take benefits may not be the most important decision you make, especially if you’re married.

 

There are several different claiming strategies that may help married couples optimize their benefits and the benefits available for children who are minors or have special needs. These options should be carefully considered before filing for benefits.

 

Your filing decision may also be affected by your work status and income. If you file early while still working, and your earnings exceed established limits, then a portion of your benefit may be withheld. In addition, your income will help determine whether your Social Security benefit is taxable.

 

If you would like to discuss your options for claiming Social Security benefits, give us a call.

 

Weekly Focus – Think About It

 

“Take time for all things: great haste makes great waste.”

–Benjamin Franklin, Founding Father

A Simple Plan to Achieve More and Feel Good About It

A Simple Plan to Achieve More in Life and Feel Good About the Results

Mike Desepoli, Heritage

We tend to overestimate what we can accomplish in the short-term and underestimate what we can accomplish in the long-term. The frustration that results is one big reason why so many New Year’s resolutions die before Spring.

But if you use these key strategies that are supported by deeply-held values – and science!  –  you’ll set better goals, achieve them, and feel better about yourself while doing so.

Know your values.

Knowing your values can provide real clarity on what you want to achieve in your life.

So ask yourself, what’s important to you? What makes you excited to get up in the morning? What are the passions and interests that fill your time when you’re not working? Who are the people you do those things with?

Another way to explore your values is to try new things. For example, volunteering at your local church or community center might reveal a passion for teaching or philanthropy that you never knew you had. These active experiments can become even more important as you age and start thinking about how you’ll stay happy and engaged in retirement.

Align your goals with your values.

Behavioral scientists have found that achieving goals is rarely a matter of ability or knowledge. For example, a person who wants to lose weight knows that eating ice cream with hot fudge five nights a week is not compatible with weight loss. Yet, the reason they keep downing that ice cream is often due to a lack of motivation. They might feel the immediate pleasure from the ice cream outweighs (no pun intended) the longer-term result of no weight loss, or worse, weight gain.

The more important a goal is to us, the more motivated we are to achieve it. Asking “Why?” can help you align your goals with your values and increase that motivational component:

  • Why should you stop eating ice cream five nights a week? Because I want to be healthier.
  • Why do you want to be healthier? So that I can live a longer and more active life.
  • Why do you want to live longer and be more active? So that I can do more things with my children and grandchildren.

Now we’ve identified core values – health and family – that are tied to the goal. These values will make the goal more important, and more likely to be reached.

Develop an action plan.

Asking “Why?” helps us move our goal-setting to a higher, value-driven space.

Asking “How?” helps us drill down into specific actions we can take to achieve those goals.

“I want to lose weight” is the sort of goal many people set and then abandon. That’s because it’s too unspecific. You can’t just “lose weight” every day until you hit your desired number.

So ask yourself, “How am I going to lose weight?” An answer like, “I’m going to exercise more” is closer, but still not actionable enough.

So how are you going to exercise more? Take a bike ride through your neighborhood every morning? Jog for 30 minutes after work three days every week?

Those are small but solid steps that you can use to develop an action plan. You might even go a little further and join a gym, start a neighborhood walk group, or hire a coach to add an extra layer of accountability and keep you on track. And yes, cut out the ice cream and hot fudge!

Measuring is Motivating.

Whatever goal you set, try to keep score. It could be as simple as pulling out a piece of blank paper and putting a checkmark on it for each day you don’t eat ice cream. We find that the act of keeping score creates its own momentum and can be like a “pat on the back” for a job well done.

Be resilient.

Even a perfectly-set, highly-motivated goal will be challenging. Some lazy Saturday you’ll snooze past your workout. You’ll cheat on your diet. An unexpected home repair might throw off your budgeting goals for the month. But that’s ok! We’re all human. Roll with it that day but then get right back to your plan.

All goals and personal improvements require effort. The grit we need to get over those inevitable humps is its own kind of skill that you can cultivate. Try to push yourself above and beyond your smaller targets. Welcome and accept feedback and criticism that can make you perform better. Prepare yourself to do better tomorrow when your alarm goes off.

And most importantly, stay positive. If your goals truly are aligned with your values, then working towards them shouldn’t feel like punishment. When you experience setbacks, try to embrace them as learning opportunities and adjust your action plan accordingly. And here’s an important piece of advice–when you hit small milestones on your way to big goals, treat yourself. We can all use a little positive reinforcement.

We’re here to help you.

What you aspire to achieve may require a financial commitment. Please contact us and we can discuss your particular situation and see how we can help you get on a faster path to achieving your life’s aspirations.

Sources

https://www.belayadvisor.com/behavior/

https://99u.adobe.com/articles/55219/true-grit-how-to-build-up-your-resilience

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 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

 

 

Giving: How To Do The Most Good Without Disrupting Your Financial Plan

Giving: How To Do The Most Good Without Disrupting Your Financial Plan

Lou Desepoli, Heritage

Many studies have shown that charitable giving provides greater happiness than buying more stuff. Eventually, you get used to your fancy new car, and the enjoyment it provides goes down. But giving forges feelings of connectedness and community that don’t fade away.

Incorporating charitable giving into your financial plan is a great way to make sure that your generosity is aligned with the things that are most important to you. Some forethought about these key issues will also make sure that your good intentions don’t throw off the rest of your long-term planning:

Have a purpose.

The most effective charitable giving is thoughtful and intentional. It may be helpful for you and your spouse to ask yourselves some questions that will narrow your focus, such as:

  • Do we want to give to a national or local cause?
  • Are there pressing issues in our community that we feel we can help impact?
  • Do we have any personal connections to causes, such as medical research or support for the arts?
  • Want to support friends or family by contributing to causes that impact their lives or fulfill their passions?
  • Do we want to support a religious organization, such as our church?
  • Are our charitable impulses motivated by on-going problems, such as education or homelessness, or would we rather position ourselves to react to events such as natural disasters

Do your homework.

Once you’ve settled on a cause, do some research on potential recipients. Visit the local nonprofit you’d like to support and meet with its leadership team. Is the organization running itself responsibly? Are there good, competent people in charge? Will these people get the job done? Don’t sink your money into a well-intentioned black hole.

If you’re looking to give to a national organization, keep in mind that even some of the biggest names have come under fire lately from watchdog groups for misusing donations. Make sure you’re giving to an organization that’s doing what it says it’s going to do with your money.

Also, remember that big organizations – even non-profits – have to manage things like overhead, salaries, and insurance. Are you happy supporting the organization itself? If you want to see your money in action more visibly, you might be happier giving locally.

Beware the internet.

Whenever something bad happens in the world, our inboxes and social media are flooded with donation links. Read before you click. Be especially wary of crowd-funded campaigns on sites like GoFundMe. The cause may sound worthy, but these sites do not provide meaningful oversight on every campaign. Your money could be going to a cause, or it could be going straight into a scam artist’s pocket. You’ll never know for sure unless you know the person organizing the campaign.

Find out what will do the most good.

There’s more than one way to give. Maybe the local adult literacy center needs volunteer tutors as much as it needs money. Perhaps you’d feel more fulfilled helping out at your church’s food bank than you would feel by writing a check. Taking a more active role in a cause that’s important to you might be the most valuable thing you can give.

However, if you want to help with large-scale problems outside your own community, like hurricane recovery on the other side of the country, money is usually the most effective way to contribute. Unlike toiletries or canned goods, money doesn’t have to be boxed and shipped. You’re better off contributing to large, trustworthy organizations that already have systems and pipelines in place.

Know your limits.

Especially as you near retirement age, your giving should be a planned part of your budget. Don’t make a large one-time contribution that’s going to force you to dip into an emergency savings fund. Don’t sign up for a recurring gift that’s going to put a strain on your monthly bills. If you can’t give as much money to a cause as you’d like, think about supplementing a smaller contribution with regular volunteering.

Sometimes our best intentions get us into the most trouble. It’s great that you and your spouse want to use your money to try to make the world a better place. But your comfort and happiness are important too. Even the wealthiest people have to say no.

If you are ever in doubt, let your core values be your guide. Apply the same principle to your giving as you do to the rest of your life-centered financial plan: use the money you have to get the best life possible. With a little planning, you’ll make life better for those around you as well.

 

For more info on this topic and many others, check out The #AskTheAdvisor Show

Should I Sacrifice My Retirement to Support My Children?

Should I Sacrifice My Retirement to Support My Children?

Mike Desepoli, Heritage

Most parents will say that they want to help their children as much as they can and give them every advantage. But what if “every advantage” comes at the expense of the parents’ retirement savings and investments?

According to a survey by NerdWallet, 80% of parents are covering or have covered an adult child’s expenses after the child turned 18. That generosity can cost parents up to $227,000 of their retirement savings.*

Can you afford to press pause?

Some parents who are still supporting adult children rationalize the expense by telling themselves they’re “just pausing” their retirement plan. This is especially common of parents who want to help with a major life transition, like college tuition, a first home, a first car, or a wedding.

However, while your adult child can apply for scholarships, sign a lease, or take out a mortgage, there are no “scholarships” for retirement. If supporting an adult child causes you to slip below your baseline budgetary needs or savings goals, it can be difficult to catch up.

Even smaller expenses add up in the long run. You may think you’re “only” giving your young adult $30 per month as they continue to piggyback on a family cell phone plan. But if that $30 would have gone into an IRA, 401(K), or investment account, you’re not just losing $30 every month – you’re losing out on potential capital gains and compounding interest that can add up to thousands of precious retirement dollars.

Check their budget.

If you do decide to help an adult child, it’s a good idea to take steps to ensure your helping doesn’t turn into a lifestyle subsidy.

Depending on the nature of your financial support, it might make sense to get a good understanding of your child’s spending patterns. Chances are they don’t have a budget you could look at but ask them what their typical expenses are each month. You have every right to make sure that your child’s financial need isn’t the result of unnecessary creature comforts, lavish vacations, etc.

By getting a sense for their spending, you might be able to help your child find ways to economize, which could help limit your own expenses.

Set terms.

Another way to make sure your child doesn’t remain reliant on you is to set terms. Much like asking to understand your child’s spending, hammering out an agreement strikes some parents as intrusive, or even cruel. But it’s important that you and your child both understand each other’s expectations going forward.

For starters, are you giving your child a gift or a loan?

If it’s a gift, exactly how will the money be used? Are you helping your child solve a problem for good, or will this gift only lead to more problems, and more pressure on your retirement savings? Again, asking for specifics isn’t mean, it’s responsible giving.

If it’s a loan, what are the terms? Are you charging interest? When will your child pay you back? Maybe establishing a monthly payment plan as part of the child’s budget is a good idea.

Don’t be afraid to say no.

Saying no to your children never feels good, not even when they’re grown. But sometimes that’s the best thing you can do as a parent.

If you look at your child’s budget and the intended use of your money and decide a loan or gift is not in your child’s best interest, or could potentially damage your retirement plan, then saying no is an option.

There are more ways to help a child than writing a check. Maybe you have a connection who could help your child find a better job. Offer to go with your child to the bank and help with loan applications. Do some online research into scholarship and government grant opportunities that your child can take advantage of.

Many of our clients introduce their adult children to our life-centered planning team. Our advisors can be an excellent resource to help your child move towards financial independence and start planning for their own future.

Remember: your child has his or her entire working life to figure out how to balance their checkbook. But your retirement will be here much sooner than you think. Think long and hard about providing your child with a short-term fix if it’s going to set yourself up for long-term financial stress.

 

*Source: https://www.nerdwallet.com/blog/study-lifetime-cost-supporting-adult-children/

Spending: What to Do When You and Your Spouse are NOT on the Same Page?

Spending: What to Do When You and Your Spouse are NOT on the Same Page?

Mike Desepoli, Heritage

Most married couples take a “divide and conquer” approach to household tasks and chores. One spouse might handle weekly shopping, the other might handle garbage and recycling. Or one spouse might handle laundry and cleaning, the other might handle yardwork and maintenance. One spouse might drive the kids to school, the other might handle pickup and extracurricular activities.

But household spending and budgeting is one of those responsibilities that’s best tackled together. Money issues are one of the biggest sources of marital tension, and a leading factor in divorces. Here are five ways that you and your spouse can make sure you agree on your household spending, avoid surprises, and maximize the Return on Life ™ your money provides.

Have an open and honest discussion.

Many couples assume their attitudes about money are aligned. Then one day, the roof needs an emergency repair that taps a savings account, or someone walks in the door with an unexpected splurge purchase (or worse yet, hides it!).

Stressful situations are not the ideal time for a couple to discover significant differences in spending habits. Sit down with your spouse and have a thorough review of your finances, and your monthly budget. Find compromises that will allow you to save for the future while still enjoying your present.

Understand the total household cash flow.

In many households, one spouse handles all the bill payments. This can lead to misunderstandings, and arguments, about where the money goes every month.

It is important for both spouses to understand how much the household spends every month, and how your bills get paid. If you’re the one who’s usually in charge of bills, take an hour to walk your spouse through your process. Show him or her which bills are paid electronically, which are paid by check, the monthly amounts and due dates, etc. This won’t just help both spouses understand the monthly cash flow, it will ensure that both spouses can handle household finances in the event of an emergency.

Be transparent about all assets and liabilities.

Newly married couples might still have banking or credit accounts that are only in the original account holder’s name. The other spouse might not find out about these accounts until a credit card is maxed out, or a checking account is overdrawn.

Again, the less stressful your reason for talking to your spouse, the more positive the outcome will be. Financial secrets tend to come out at the worst times, compounding stress, hurt feelings, and strain on your budget.

Your spouse should be a cosigner and beneficiary on all of your accounts, and vice-versa. If one of those accounts carries a large liability, get out in front of the problem and talk about how to start paying it down. Discuss the ramifications of combining any large individual assets with a tax professional or your financial advisor.

Agree on a budget.

If one spouse is responsible for budgeting and bill pay, that person often becomes The One Who Has to Say “No.” No eating out this week. No weekend trip to the waterpark,  no new cell phones, and certainly no new clothes.

No fun!

Nobody likes being in that position, especially if you’re saying “No” to your children. Eventually, you or your spouse will resent being The One Who Has to Say “No.” You should both understand the household’s monthly cash flow and agree on how your money is – and isn’t – spent.

Get help

Mint.com is just one of the many apps and web services that help households set and maintain a budget. If you’re a small business owner, Intuit offers a line of bookkeeping and tax prep solutions to fit any needs. Automating select bill payments and regular contributions to retirement and savings accounts can also help to clarify your monthly budgeting picture.

Finally, if there’s a spending gap between you and your spouse that seems impossible to bridge, we can be an excellent resource. It’s important to us that we understand where clients’ attitudes about money come from. We also strive to understand how they’ve developed these attitudes, and how they can diverge between couples. Facilitating this dialogue is key to making sure both people have the best life possible with the money they have…and we can help do that for you.

For more info on spending tips, check out this video: 1 simple tip to help curb the urge to spurge!

Facebook Data Scandal: What you need to know

Facebook data scandal: Here’s everything you need to know

Mike Desepoli, Heritage

Cambridge Analytica is in the midst of a media firestorm. This came after an undercover sting operation caught senior executives boasting about psychological manipulation, entrapment techniques and fake news campaigns. Alongside social media giant Facebook, the London-based elections consultancy is at the center of an ongoing dispute over the alleged harvesting and use of personal data.

What happened

It started with an explosive expose broadcast by Britain’s Channel 4 News on Monday. In it, senior executives at Cambridge Analytica, were caught on camera suggesting the firm could use sex workers, bribes and misinformation in order to try and help political candidates win votes around the world.

How did this initially come to light?

The Channel 4 News investigation followed articles published over the weekend by the New York Times and U.K. newspaper The Observer. The reports sought to outline how the data of millions of Facebook profiles ended up being given to Cambridge Analytica.

In this way, 50 million Facebook profiles were mined for data. Kogan then shared this with Cambridge Analytica, which allowed the firm to build a software solution. The software was used to help influence choices in elections, therefore spurring the narrative of collusion. This was according to a whistleblower, who revealed the alleged practices to both newspapers.

How has Facebook Stock responded?

As you might expect it’s been under quite a bit of pressure the last few days. It is currently off about 10% from recent all time highs made in February. With growing calls for executives to appear before congress, it will likely continue to be under pressure. In the news today, there is a group of investors who have filed a class action lawsuit against Facebook with the intention to recoup stock losses.

What happens next?

U.S. senators have urged Facebook boss Mark Zuckerberg to testify before Congress. They will likely ask about how the social media giant will protect its users. Meanwhile, in the U.K., Zuckerberg has been summoned by the chairman of a parliamentary committee in order to explain the “catastrophic failure” to lawmakers.

The head of the European Parliament has also said it will carry out an investigation to see whether data was misused.

 

 

Tariffs & Trade Wars

Tariffs & Trade Wars

By Emmet Sullivan , Guest Blogger

 

Many consumers, investors, and ordinary citizens often worry when the word “tariff” is thrown around. Instantly signaling an increase in price in imported goods, the word is almost synonymous with a negative economic impact.  Thinking in terms of the big picture, we need not jump to such hasty, and often misguided conclusions.

What is a Tariff?

First, it is important to understand what tariffs are, and what they hope to accomplish. A tariff is an additional tax imposed on imported goods.  By imposing these taxes on imports, national governments hope to discourage large-scale outsourcing. As a result they hope to spur domestic production by driving import prices up. When the prices of imports go up, the hope is that consumers will look to domestic suppliers for goods they would normally obtain from international sellers.

The current tariff talks in the U.S. are based around metals. Specifically, President Trump wants to impose a 25% tariff on imported aluminum and steel.  The levy is intended to increase demand of domestically manufactured metals by increasing the price of their international substitutes.  This in turn might create a number of job opportunities in U.S. metal production related to the surge in demand.

Trade War?

Many worry that this tariff may result in an international trade war between the U.S. and countries like China and South Korea. There is speculation that trading partners might retaliate with similar tariffs. Therefore, this would make it harder for U.S. producers to export their goods.  However, Canada (the U.S.’s largest supplier of both aluminum and steel) and Mexico (the U.S.’s third largest trading partner) are both exempt from the tariff as part of the ongoing re-negotiation of the NAFTA agreement.

In summation, the tariff should not be an immediate cause for worry. As stated, some of the U.S.’s largest trading partners are exempt from its effects, and some speculate that it has been implemented as a negotiation tool for international agreements like NAFTA. The tariff’s long term effects remain to be seen, but we caution against fear of an economically-harmful trade war at present.

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

Weekly Market Insights

Heritage Weekly Market Insights

January 30, 2018
This Week In The Markets

The numbers are coming in.

Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter’s sales and earnings are reported during the first quarter of the year, and first quarter’s sales and earnings will be reported during the second quarter, and so on.

Through last week, about one-fourth of the companies in the Standard & Poor (S&P)’s 500 Index had reported actual sales and earnings for the fourth quarter of 2017. As far as sales go, a record number – 81 percent – of companies sold more than expected during the fourth quarter. That was quite an improvement. FactSet reported:

“During the past year (four quarters), 64 percent of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56 percent of companies in the S&P 500 have reported sales above the mean estimate on average.”

The mean is the average of a group of numbers.

The money a company makes through sales is called revenue. For instance, if a lemonade stand sells 100 glasses of lemonade for $1 each, then the proprietors have earned $100. That is the stand’s ‘revenue.’ Of course, as every parent who has financed a lemonade stand knows, revenue doesn’t include the cost of the product. ‘Earnings’ are what the company has left after expenses – the bottom line. If every glass of lemonade cost 50 cents, then the stand’s earnings are $50.

Companies in the S&P 500 are doing pretty well on earnings, too. About three out of four companies have reported earnings higher than expected. Overall, earnings are 4.5 percent above estimates.

Through Friday, annual earnings growth for S&P 500 companies was 10.1 percent. It’s still early in the fourth quarter earnings season, but the data so far seem likely to confirm that 2017 was a bright, sun-shiny year for U.S. companies.

Let’s Take A Look at Performance

Data as of 1/26/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 2.2% 7.5% 25.1% 11.8% 13.9% 7.8%
Dow Jones Global ex-U.S. 1.9 7.0 28.2 7.8 5.5 1.6
10-year Treasury Note (Yield Only) 2.7 NA 2.5 1.8 2.0 3.6
Gold (per ounce) 1.4 4.4 13.7 1.8 -4.0 3.9
Bloomberg Commodity Index 2.6 3.0 2.9 -3.4 -8.4 -7.1
DJ Equity All REIT Total Return Index 1.7 -2.8 4.6 2.8 8.2 7.4

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

certain parts of the circular economy

probably adapt to cities and towns better than they do to rural areas. 

What is the circular economy?

It is “a system that reduces waste through the efficient use of resources. Businesses that are part of the circular economy seek to redesign the current take/make/dispose economy, a model which relies on access to cheap raw materials and mass production. For example, car sharing addresses the inefficiency of privately owned cars – which are typically used for less than one hour a day,” explains Morgan Stanley.

Imagine not owning a car.

Clearly, it’s not something that would work everywhere. However, if you live in a city or town that has public transportation, ride sharing, car rentals, and bicycles, it’s possible. If you’re retired and you can organize your days in the way you like, it may even be sensible because owning a car is expensive. Transportation costs are the second highest budget item for most households, reports U.S. News. Housing costs top the list.

Giving up a car could help households save a lot of money.

According to AAA

owning and operating a new car in 2017 cost about $8,469 annually, on average, or $706 a month. Small sedans are the least costly ($6,354 per year), on average, and pickup trucks are the most expensive ($10,054 per year), on average, of the vehicles in the study. The calculations include sales price, depreciation, maintenance, repair, and fuel costs.

AAA’s estimate does not include insurance. In 2017, the national average premium for a full-coverage policy was $1,318 annually, according to Insure.com. Auto insurance premiums are highest in Michigan ($2,394) and lowest in Maine ($864).

Combining the averages, the cost of auto ownership is almost $10,000 a year. It’s food for thought.

Weekly Focus – Think About It

“Conservation is a state of harmony between men and land.”

–Aldo Leopold, American author and conservationist

 

Best regards,

 

The Heritage Team

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

continued

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Stock investing involves risk including loss of principal.

* Consult your financial professional before making any investment decision.

 

Sources:

https://insight.factset.com/record-percentage-of-sp-500-companies-beat-sales-estimates-for-q4

http://www.investinganswers.com/financial-dictionary/ratio-analysis/arithmetic-mean-2546

https://www.accountingcoach.com/blog/what-is-the-difference-between-revenues-and-earnings

https://insight.factset.com/sp-500-earnings-season-update-january-25

https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012518.pdf (Page 18)

http://www.morganstanley.com/access/circular-economy

https://money.usnews.com/money/personal-finance/saving-budget/articles/2017-02-14/how-to-save-money-by-ditching-your-car

http://newsroom.aaa.com/tag/driving-cost-per-mile/

https://www.insure.com/car-insurance/car-insurance-rates.html

https://www.brainyquote.com/quotes/aldo_leopold_387729

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.

The 2018 Personal Finance Roadmap

The 2018 Personal Finance Roadmap

By Mike Desepoli, Heritage

Ah Spring time. Warm weather and longer days.

People also tend to be more motivated in the Spring to organize, clean, and go through their stuff.

While it’s always good to get rid of old stuff and clean your house or apartment, I think it’s also a perfect time to leverage your motivation to give your personal finances a good deep cleaning as well.

Regularly checking up on your finances is important. There are many things you can do to improve your personal finances. However, a majority of them are really easy to put on the back-burner. Trust me – “buy life insurance” was on my to do list for two years before I finally got around to it.

Carve out some time this Spring to go through this spring cleaning personal finance checklist. It will help you start doing some things you’ve been meaning to do, as well as give you a check-up on certain things you are already doing to ensure you are still in a good spot.

Check your Net Worth

Checking your net worth can be a painful experience, especially for those who are in student loan or other debt. Even if you fall in this group, though, it’s still better to know where you stand than to be ignorant of your situation.

I have said in the past that for a large majority of people, especially millennials, it’s more important to focus on income than net worth. That’s exactly why it took me so long to get around to utilizing online platforms to track my finances. But once I did it felt good to know exactly where I stand at any point in time.

Review your Budget or Start Budgeting

One of the things I stress in personal finance lunch and learns or coaching sessions is to not only budget, but to regularly review your budget.
If you haven’t started a budget yet, that’s the first thing you should do. Budgeting can be as hands-on or hands-off as you want. Some people hold themselves to a specific spending threshold while others (myself included) just track the monthly trend and make sure they aren’t spending too much on things they don’t care about.

If you already budget, take some time to review your monthly spending. Ask yourself these questions:

• Is my spending in alignment with my values?
• Are there areas I can cut back spending on (i.e. restaurants, cable, cell phone, entertainment)?
• Is my current spending habits allowing me to pay down debt or prohibiting me from paying down or incurring more debt?
• What changes can I make to create more cash flow?

Review your Debt

While Personal Capital does a good job of pulling in your debt, I think it can be valuable to lay out all your debt in a spreadsheet as well.
When I’m looking at my debt I focus on a couple things: what type of debt it is and what the interest rate is?

There are different strategies you can use depending on the type of debt, but the first goal should always be to get a lower interest rate. If you have high interest credit card debt it can make a lot of sense to refinance it through a personal loan. It it’s student loan debt there is also opportunities to refinance at a lower rate.

Debt can be overwhelming, and I always encourage people to be action-oriented with their debt. Sometimes no action is needed, for example if you have it on auto-payment and it will be done at a specific date in the future (assuming you are happy with the interest rate). Others may want to be more proactive, such as refinancing, increasing their income through their 9-5 or a side hustle, or cutting expenses to pay it off faster.
Analyze your Income

It’s easy to get comfortable in a job and lose a pulse on whether or not you are getting paid fairly. Take some time to review your 9-5 income and give your resume a refresh. Some specific things you can do include:

• Review and compare salary data on sites like glassdoor
• Review job listings on an app like indeed to see what sort of skills employers are looking for
• Update your LinkedIn Profile
• Update Your Resume

Perhaps you are happy with where you are at with your 9-5 and the prospect of switching employers – even if it meant a higher pay – isn’t attractive. Or perhaps you are already maxed out at your 9-5 but still want to increase your income.

Check your Emergency Fund

Now you probably don’t need to check your emergency fund. If you have one, you likely know how much it is. If you don’t have one, you also know how much you have.

But when I say check your emergency fund I want you to actually think about whether or not your emergency fund is sufficient. How many months could you live off of it? If your answer was less than three months, it’s time to make building your emergency fund a priority. If you really want to challenge yourself make a plan of hitting somewhere in the six to twelve month range.

Now, if you don’t have an emergency fund then it’s time to get one. I will be the first to admit that building an emergency fund is not easy, especially when you have debt and other things that you want to put your income towards. But I can also tell you that it’s one of the best things you can do for your peace of mind.

Start by setting a realistic goal like saving $100. Then challenge yourself to increase that to $500, and so on. Eventually you will want to have the equivalent of three or more months of monthly expenses set aside. The important thing is to get started.

Review your Retirement & Health Savings Account

Another thing you should review is your retirement and Health Savings Account. A few things to check are:

• Are you contributing up to your company match for your 401k?
• Whether you have a company match or not, how much money are you actually putting into your 401k and/or IRA?
Are you able to contribute more?
• What investments do you haven in your 401k and/or IRA? Do you need to re-balance it?

I’m all about the “set it and forget it” approach to investing, especially when it comes to retirement accounts, but it is important to check up on them every once in a while, even if it’s just once a year.

Review your Insurance

The last thing on the Spring Cleaning Personal Finance Checklist is review your insurance. Insurance isn’t the most exciting thing in the world, but it serves an important function and can protect you from expensive, unexpected bills – or even bankruptcy.

Take an inventory of your current insurance coverage. How much do you pay in premiums? What are you actually getting in return? Is your coverage adequate?

Many times people don’t realize how much they are paying for insurance because it’s baked into their paycheck, mortgage payment, or is on auto-pay. Understanding the true cost of your insurance is important, if not just to have it as a reference point.

Insurance isn’t all about cost. You can oftentimes get cheaper insurance, but if the coverage is bare-bones you are going to regret it if something big happens. One of my former manager’s house burnt down right after he switched to a cheaper home insurance company. They ended up being very difficult to deal with and caused much more hassle than a different company likely would have. That’s not always the case, but I think it’s important to balance cost with quality of coverage.

Besides reviewing your current coverage it might make sense to add some additional coverage as well. Up until a little over a year ago I did not have any life insurance, but I decided to open a million dollar policy at age 27. There’s are many reasons to consider life insurance. In general, if others depend on your income and would be impacted if it were to go away, you should look into getting life insurance.

For more info on this topic checkout: (VIDEO) #AskTheAdvisor 55: The 2018 Personal Finance Roadmap

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

President Trump’s Speech

President Trump’s Speech

 

It was a grand slam.

Major U.S. stock markets were positively euphoric following President Trump’s speech on February 28. Optimism about the new administration’s pro-growth policies propelled the four major U.S. stock indices to record highs, despite a dearth of policy details, reported Financial Times.

It’s hard to pinpoint exactly why stocks have moved so far, so quickly. However, it appears that mom-and-pop investors have become quite enthusiastic about the asset class according to data from JPMorgan Chase cited by Bloomberg. While institutional investors (pensions, insurance companies, etc.) have been reducing exposure to stocks, smaller investors have been loading up on shares.

CNBC reported some industry professionals, including Goldman’s chief U.S. equity strategist David Kostin, believe stocks have become too highly valued. ZeroHedge.com quoted Kostin, who said:

“Cognitive dissonance exists in the U.S. stock market. S&P 500 is up 10 percent since the election despite negative EPS [earnings per share] revisions from sell-side analysts…Investors, S&P 500 management teams, and sell-side analysts do not agree on the most likely path forward. On the one hand, investors, corporate managers, and macroeconomic survey data suggest an increase in optimism about future economic growth. In contrast, sell-side analysts have cut consensus 2017E [estimated] adjusted EPS forecasts by 1 percent since the election and ‘hard’ macroeconomic data show only modest improvement.”

Financial Times reported pessimism prevails in the bond market. One bond market professional said, “The bond market is taking a totally different view from the equity market. Blowing raspberries is a good way to put it…There’s no belief that the growth agenda will be dramatic.”

So, is strong economic growth ahead? Do bond investors or stocks investors have it right? Are institutional investors or mom-and-pop investors positioning themselves correctly? Only time will tell.

in the markets

Data as of 3/3/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.7% 6.4% 9.6% 8.9% 11.8% 5.7%
Dow Jones Global ex-U.S. -0.2 5.2 12.2 -1.4 1.7 -0.5
10-year Treasury Note (Yield Only) 2.5 NA 1.8 2.6 2.0 4.5
Gold (per ounce) -2.2 5.8 -1.9 -3.1 -6.4 6.8
Bloomberg Commodity Index -0.3 -0.4 13.4 -13.6 -9.8 -6.2
DJ Equity All REIT Total Return Index -1.0 3.2 12.4 11.0 11.2 5.5

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

don’t think so!

Tax season is upon us. That means we can all use some entertainment. While many folks dread the process of completing and filing taxes, some see it as an opportunity to test the boundaries of the system. Here are a few deductions Americans have taken that have failed to pass muster in tax court, courtesy of Kiplinger.com:

You cannot deduct the cost of a good night’s sleep.

A tax preparer who worked from home escaped to a hotel because her clients were calling in the wee hours of the night and causing her to lose sleep. When she attempted to take a business deduction for the hotel expense, the tax court ruled a good night’s sleep is a non-deductible personal expense.

You cannot take a theft loss deduction for poor construction

A couple moved into their newly built dream home only to realize the builder had cut some corners. The house had some serious issues, including its foundation. The couple claimed the builder had defrauded them and took a large theft loss deduction. While taxpayers can deduct losses from a home-related theft, shoddy construction doesn’t qualify.

You cannot take a depletion deduction for bodily fluids

A woman earned $7,000 a year donating blood plasma because of her rare blood type. She took a depletion deduction, claiming “the loss of both her blood’s mineral content and her blood’s ability to regenerate,” wrote Kiplinger. While companies that take coal, iron, and other minerals from the ground can take a depletion deduction, the tax court ruled that individuals cannot claim depletion on their bodies.

You cannot deduct a business trip if there are no formal business meetings involved

A repo firm sponsored a trip to Las Vegas for its bank customers. The firm’s employees chatted with clients about business on the way to Vegas, but no formal meetings were held. The tax court denied the deduction.

Before you get creative with your taxes, consult with a tax professional.

Weekly Focus – Think About It

 

“Because of your smile, you make life more beautiful.”

–Thich Nhat Hanh, Vietnamese Buddhist monk and peace activist

The Added Value of Financial Advisors

The Added Value of Financial Advisors

By Mike Desepoli, VP of Heritage Financial Advisory Group

As financial advisors we are often asked whether it is worth the cost to hire a financial advisor. I know, very ironic. After all, there is a cost to make you money. People say they can listen to the news to find out where and how to invest, so, “Wouldn’t I be better off just keeping that fee for myself?” That is an excellent question with an answer that depends on many factors.

Good financial planning decisions extend well beyond where and how you invest. Two major research efforts have attempted to quantify how good financial decision making can enhance one’s lifetime standard of living. It is important to understand what this research means, because this may not always equal a higher portfolio return in the short term. Financial advisors have a range of tasks they manage for clients, and how well they do it can add to the bottom line of your portfolio.

The research identifies how good decision making can enhance sustainable lifetime income on a risk-adjusted basis. The ability to spend more than you could have otherwise can be interpreted as meaning that the assets earned a higher return net of taxes and fees to make that spending possible.

Recent research conducted by financial giant Vanguard took a closer look at the value a financial advisor can add in real percentage terms. Their research indicates that overall, the estimate for value added by an advisor annually is 3%. While there are many different aspects of the financial planning process, they found that advisors add value in 3 key areas.

Portfolio Construction

Constructing a well-diversified portfolio that is both tax and cost efficient is one of the ways a financial advisor helps increase your investment returns. They will also help make sure you stay diversified, and don’t fall victim to the temptation to put all your eggs in one basket. Many do it yourself investors find themselves chasing the latest hot stock, usually at the tail end of a long run. Investors without a plan will ultimately buy high, sell low when they run out of patience, and repeat the process into oblivion. Having a well-constructed portfolio accounts for just over 1% of the overall annual return.

Behavioral Coaching

Your advisor has the ability and the time to evaluate your portfolio investments, meet with you to discuss your objectives, and help get you through tough markets even when your emotions try to get in the way. All of these factored together potentially add value to your net returns over time. The single greatest cause of failure in the investment markets can be attributed to emotional decision making. It is no secret that people are emotionally with their money. We work so hard for it who can blame us. However, allowing your emotions to cloud your judgement and decision making is sure to drag down your portfolio. Work with a financial advisor who will keep you calm, cool, and collected even when the chips are down.

Wealth Management

This part of the job entails making regular changes to your portfolio to help reduce risk. It also involves helping clients navigate withdrawals in a way to help limit the taxes they will pay. Many investors incur taxes that could have otherwise been avoided or delayed had they navigated their withdrawals differently. It is very important to understand the taxable status of money that you are transferring or withdrawing from your account. If you are dealing with a retirement account, it is imperative to know if the funds are pre or post tax. We’ve come across many folks in our travels that created a taxable mess by simply being uninformed. If you don’t know, ask your financial advisor or accountant.

About Heritage

Heritage Financial Advisory Group is a Long Island based Financial Advisor that specializes in investment management and financial planning. We work primarily with families, entrepreneurs, and Doctors to create financial strategies that have a lasting impact. For more information, say hello to our team of professionals.

 

6 Easy Ways to Ruin Your Retirement

6 Easy Steps to Ruin Your Retirement

 

Many people I know have concluded that retirement was worth waiting for and worth planning for. Those who planned well (and who are lucky enough to have good health) are generally finding this to be a very satisfying time in their lives. But those who didn’t plan well or who couldn’t save enough are finding that retirement can be difficult.

My commitment is to help people, but this week I’m switching roles so I can give you some dynamite tips for having an unhappy retirement. (Of course, what I’m really advocating is that you do not do these things.)

Don’t save enough money.

Spend (and borrow) whatever it takes to keep yourself and your family happy. You can always catch up later when you get into your peak earning years, when the kids are gone, or when you’re finally finished paying for whatever else is more important right now.

The likely result: You could find yourself in “panic mode” in your 50s and 60s. You could have to work longer than you want. Another popular choice, you could have to reduce your living standards after your work life is through. You could fall prey to persuasive salespeople (see my final tip below) who do not have your best interests at heart. Or maybe even all of the above.

Be careless about how you plan and budget for retirement expenses.

When I was an advisor, I was amazed how many investors neglected to include taxes as a cost of living in retirement. If you’re living off of distributions from a non-Roth IRA or 401(k), the full amount of those distributions is likely to be taxable. For extra credit: Don’t spend any money on a financial advisor to help you plan.

The likely result: You may go into “panic mode” when your accountant hands you an unexpected tax bill.

Lock in your expectations about your life in retirement and make rigid financial decisions.

There are plenty of ways to do this. You could sell your house and move somewhere cheaper even though you don’t know anybody there. Another option, you could buy a fixed annuity to have an income that’s certain. You could fail to establish an emergency fund. (After all, what could go wrong?) You could get sick or need surgery that isn’t covered by Medicare or other insurance.

The likely result: Things will happen that you don’t expect, probably sending you once again into “panic mode” and making you vulnerable to the pitches from all manner of enthusiastic salespeople.

Ignore inflation, since it doesn’t seem like a current problem.

Assume that $1,000 will buy roughly the same “basket of goods and services” in 2026 and 2036 that it will today. Be confident that you know what the future holds. After all, the years of high inflation that are often cited happened a long time ago. Things are different now.

The likely result: You probably won’t be thrust into “panic mode” since inflation is usually gradual. But one day you will realize with a start that things are costing a lot more than they “should,” and your income can’t keep up.

Keep all your money where it’s “safe,” in fixed income.

You’ll have lots of company among current retirees whose “golden” years are being tarnished because they have to rely on today’s historically low interest rates. Don’t just blindly invest in equities, because, as we all know, you can lose money in the stock market.

The likely result: You may start retirement with sufficient income to meet your needs, but those needs will probably increase, especially for health care, in your later retirement years. Your fixed income may be safe, but it won’t expand to meet increased needs.

Attend investment seminars and trust the presenters, then make important decisions without getting a second professional opinion.

You could follow the unfortunate example of a couple I know who, in their 50s, attended a retirement seminar and got some bad advice. They met privately with the presenter/saleswoman, then rolled their entire retirement accounts into a variable annuity. They thought they were giving themselves good returns, future flexibility and saving a lot of money in taxes.

In reality, they gave themselves huge headaches and nearly lost half their life savings. I helped them fight the unpleasant (and ultimately successful) battle to get out of their contract and recover their money.

This couple could teach us all some lessons, but the terms of their settlement makes that unlikely. If they disclose that they got their money back, or if they disclose how they were deceived and cheated, they will have to give the money back to the insurance company.

The likely results: You will be disappointed in the decisions you make. You will have many reasons to never trust an investment sales pitch again. You will have less money in retirement than if you had never heard of that particular seminar.

So now you have it: Six easy steps to ruin your retirement. I hope, of course, that you do just the opposite of each one of these. Unfortunately, I think there’s a high likelihood that somebody you know has fallen into one or more of these traps.

My advice: Learn from their mistakes.

Can I Retire?

Can I Retire?

A very popular question in our line of work, and a question we certainly love answering in the affirmative. But before we can even attempt to answer that question, there is a lot of work that needs to occur. Sometimes this can be done in the weeks, months, and years leading up to that question.

Our clients experience a variety of motivations throughout their lives. These motivations are the very reasons that inspire them to work with our team on developing a comprehensive financial plan. Whether for their family or their business, it is equally as important. As we work together through the planning process, a lot of questions are answered that help us chart a clearer path toward the ultimate goal.

Questions like:

-Am I saving enough?

-Have I protected my family in the event of an emergency or disability?

-When should I apply for Social Security?

-Can I retire and maintain my lifestyle?

The answer to most of these questions is largely dependent on spending habits, and the clients ability to maintain and stick within a budget.

A household’s perceived amount of spending versus its actual amount of spending can move the needle on when they can comfortably retire by a matter of years. As a result, we see tremendous value in the expense gathering process because it allows us to generate the most accurate projections. It allows us to provide the best guidance in addressing the ultimate question “can I retire?”.

Contact us to have a conversation about developing a financial plan tailored to you.