Blog Archives - Page 23 of 33 - Confidence Wealth & Insurance Solutions

Confidence Wealth & Insurance Solutions June 5, 2015 No Comments

Age-Based Tips for Making the Most of Your Retirement Savings Plan

No matter what your age, your work-based retirement savings plan can be a key component of your overall financial strategy. Following are some age-based points to consider when determining how to put your plan to work for you.

Just starting out

Just starting your first job? Chances are you face a number of financial challenges. College loans, rent, and car payments all compete for your hard-earned paycheck. Can you even consider contributing to your retirement plan now? Before you answer, think about this: The time ahead of you could be your greatest advantage. Through the power of compounding–or the ability of investment returns to earn returns themselves–time can work for you.

Example: Say at age 20, you begin investing $3,000 each year for retirement. At age 65, you would have invested $135,000. If you assume a 6% average annual rate of return, you would have accumulated $638,231 by that age. However, if you wait until age 45 to invest that $3,000 each year, and earn the same 6% annual average, by age 65 you would have invested $60,000 and accumulated $110,357. By starting earlier, you would have invested $75,000 more but would have accumulated more than half a million dollars more. That’s compounding at work. Even if you can’t afford $3,000 a year right now, remember that even smaller amounts add up through compounding.¹

Finally, time offers an additional benefit to young adults: the ability to potentially withstand greater short-term losses in pursuit of long-term gains. You may be able to invest more aggressively than your older colleagues, placing a larger portion of your retirement portfolio in stocks to strive for higher long-term returns.²

¹ This chart is a hypothetical illustration and is not an indication of any performance.

Getting married and starting a family

At this life stage, even more obligations compete for your money–mortgages, college savings, higher grocery bills, home repairs, and child care, to name a few. Although it can be tempting to cut your retirement plan contributions to help make ends meet, try to avoid the temptation. Retirement needs to be a high priority throughout your life.

If you plan to take time out of the workforce to raise children, consider temporarily increasing your plan contributions before leaving and after you return to help make up for the lost time and savings.

Also, while you’re still decades away from retirement, you may have time to ride out market swings, so you may still be able to invest relatively aggressively in your plan. Be sure to fully reassess your risk tolerance before making any decisions.²

Reaching your peak earning years

This stage of your career brings both challenges and opportunities. College bills may be invading your mailbox. You may have to take time off unexpectedly to care for yourself or a family member. And those pesky home repairs never seem to go away.

On the other hand, with 20+ years of experience behind you, you could be earning the highest salary of your career. Now may be an ideal time to step up your retirement savings. If you’re age 50 or older, you can contribute up to $24,000 to your plan in 2015, versus a maximum of $18,000 if you’re under age 50. (Some plans impose lower limits.)

Preparing to retire

It’s time to begin thinking about when and how to tap your plan assets. You might also want to adjust your allocation, striving to protect more of what you’ve accumulated while still aiming for a bit of growth.³

A financial professional can become a very important ally at this life stage. Your discussions may address health care and insurance, taxes, living expenses, income-producing investment vehicles, other sources of income, and estate planning.⁴

You’ll also want to familiarize yourself with required minimum distributions (RMDs). The IRS requires you to begin taking RMDs from your plan by April 1 of the year following the year you reach age 70½, unless you continue working for your employer.⁵

Other considerations

Throughout your career, you may face other decisions involving your plan. Would Roth or traditional pretax contributions be better for you? Should you consider a loan or hardship withdrawal from your plan, if permitted, in an emergency? When should you alter your asset allocation? Along the way, a financial professional can provide an important third-party view, helping to temper the emotions that may cloud your decisions.

¹ This hypothetical example is for illustrative purposes only. Investment returns will fluctuate and cannot be guaranteed.
² All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. Investments offering a higher potential rate of return also involve a higher level of risk.
³ Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against a loss.
⁴ There is no assurance that working with a financial professional will improve your investment results.
⁵ Withdrawals from your retirement plan prior to age 59½ (age 55 in the event you separate from service) may be subject to regular income taxes as well as a 10% penalty tax.

Important Disclosure

Sources:
https://www.usaa.com/inet/pages/advice_retirement_planning_getting_started_main
http://www.bankrate.com/finance/retirement/how-to-manage-money-in-early-retirement-1.aspx

Confidence Wealth & Insurance Solutions May 29, 2015 1 Comment

Reviewing Your Finances Mid-Year

You made it through tax season and now you’re looking forward to your summer vacation. But before you go, take some time to review your finances. Mid-year is an ideal time to do so, the demands on your time may be fewer, and the planning opportunities greater, than if you wait until the end of the year.

Think about your priorities

What are your priorities? Here are some questions that may help you identify the financial issues you want to address within the next few months.

Are any life-changing events coming up soon, such as marriage, the birth of a child, retirement, or a career change?
Will your income or expenses substantially increase or decrease this year?
Have you managed to save as much as you expected this year?
Are you comfortable with the amount of debt that you have?
Are you concerned about the performance of your investment portfolio?
Do you have any other specific needs or concerns that you would like to address?

Take another look at your taxes

Completing a mid-year estimate of your tax liability may reveal tax planning opportunities. You can use last year’s tax return as a basis, then make any anticipated adjustments to your income and deductions for this year.

You’ll want to check your withholding, especially if you owed taxes when you filed your most recent income tax return or you received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid a big tax bill or having too much of your money tied up with Uncle Sam. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.

To help avoid missed tax-saving opportunities for the year, one basic thing you can do right now is to set up a system for saving receipts and other tax-related documents. This can be as simple as dedicating a folder in your file cabinet to this year’s tax return so that you can keep track of important paperwork.

Reconsider your retirement plan

If you’re working and you received a pay increase this year, don’t overlook the opportunity to increase your retirement plan contributions by asking your employer to set aside a higher percentage of your salary. In 2015, you may be able to contribute up to $18,000 to your workplace retirement plan ($24,000 if you’re age 50 or older).

If you’re already retired, take another look at your retirement income needs and whether your current investments and distribution strategy will continue to provide enough income.

Image Source: http://www.statista.com/chart/3426/how-confident-are-americans-about-retiremen/

Review your investments

Have you recently reviewed your portfolio to make sure that your asset allocation is still in line with your financial goals, time horizon, and tolerance for risk? Though it’s common to rebalance a portfolio at the end of the year, you may need to rebalance more frequently if the market is volatile.

Note: Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Identify your insurance needs

Do you know exactly how much life and disability insurance coverage you have? Are you familiar with the terms of your homeowners, renters, and auto insurance policies? If not, it’s time to add your insurance policies to your summer reading list. Insurance needs frequently change, and it’s possible that your coverage hasn’t kept pace with your income or family circumstances.

Image Source: http://www.creditdonkey.com/spring-cleaning.html

Important Disclosure

Confidence Wealth & Insurance Solutions May 22, 2015 No Comments

9 Hidden and Affordable US Vacation Spots for Retirees

There are so many hidden treasure spots that many don’t know about! Locations across the United States are available for vacations that won’t break the bank, and will offer fun things to do with comfortable accommodations. The following are well known by locals, but they’re not always found by tourists, which is is one reason why retirees will love visiting these destinations.

Eureka Springs, Arkansas

Eureka Springs, Arkansas is a charming town in the Ozarks’ region of Arkansas. It’s one of the most unique towns in the state because all of the city’s streets are curved. Businesses can be accessed from multiple levels as the entrances are on different street levels due to the mountainous terrain. There are numerous tourist attractions, romantic getaways, and relaxation to be found on the decks of restaurants. Trolley rides are available and encouraged because the walk is up and down hills, and curbside parking is limited. The historical downtown business district is sight to behold. A haunted hotel, a glass chapel, and the Christ of the Ozarks Statue are among the landmarks that can be found at this unique getaway.

Yuma, Arizona

Yuma, Arizona is one scenic destination. Golfing, casinos, and the beauty of the Colorado River make this a great place for retirees to spend time relaxing in the sun. It’s one of the sunniest cities in the U.S. and is a quiet location by the river or on a boat.

Springfield, Missouri

You will love the shopping atmosphere and the peacefulness found in Springfield. A national battlefield and Route 66 make this destination a hidden gem for retirees to enjoy. Fall colors of the Ozarks are nearby.

Lake Providence, Louisiana

If a getaway to a quiet tiny town in the South is what you’re looking for, this is the destination for you. The lake is gorgeous — tree-lined and great for fishing or sitting and enjoying the view. The town is a step into relaxation with only one local motel, gravel side streets, and southern hospitality.

Cloudland Canyon, Georgia

A local state park with a secluded feel can be found near Lookout Mountain. It’s located near the Alabama and Tennessee state lines. A beautiful waterfall and spectacular scenery make this mountain destination one of the finest in Georgia.

Ackerman, Mississippi

Located near the forest, and only a short 30-minute drive to all of the shopping opportunities that Starkville has to offer, Ackerman is a great place for retirees to visit. Southern hospitality at its finest can be found at the local restaurants. Beautiful pine trees, a coal mine, and visits with the locals will make your stay a fine one.

Georgetown, Colorado

Georgetown, Colorado is a former mining town that is surrounded by the glorious Rocky Mountains. It’s a great vacation destination for a harmonious pace. Retirees will love this getaway.

Texarkana, Texas and Arkansas

Texarkana is a twin city, divided by the state line. It’s not far from favorite destinations such as the Murfreesboro diamond mine and the Ouachita Mountains. Retirees will love the city amenities and the destinations to explore nearby.

Jasper, Arkansas

This little Ozarks’ town closes down at 10 p.m., but the beauty of the Buffalo National River, the local elk that is available to be seen and photographed, and the small town hospitality will make this your favorite retirement destination. Visiting with local artists, canoeing the Buffalo, or hiking the Buffalo River Trails are just a few of the local activities that bring retirees back year after year.

Retirement is a time when we get to reward ourselves for years of hard work. Visit any of the places above. You’ll be transformed from good ol’ tourists to feeling like a local in these fun-filled destinations. You deserve it!

Confidence Wealth & Insurance Solutions May 15, 2015 No Comments

Does more wealth lead to more happiness?

Researchers have tackled this question for decades, and although the results have differed, one fact is certain: The relationship between money and happiness–or “well-being,” as many researchers put it–is complicated.

Think before you spend

In the book Happy Money: The Science of Smarter Spending, Professors Elizabeth Dunn and Michael Norton summarize their own and others’ research. What they found is that it’s not necessarily how much you make that matters to overall happiness (although that certainly contributes), but what you do with your money. They boiled down the findings to five “key principles of happy money.”

1. Buy Experiences. Investing in memories can result in a more sustained level of happiness than buying a bigger house, a more luxurious car, or other material goods. Buying the latest technological gadget might elicit the kind of joy of a child experiences opening a new toy on the holidays, but just like that new toy, the gadget loses its novelty with time–a principle psychologists refer to as “hedonic adaptation.” On the other hand, experiences–even those that are fleeting or may initially provoke trepidation, such as hang gliding–create memories that help foster prolonged contentment.

2. Make It a Treat. While you’re investing in those experiences, be sure to spread them out so they don’t become expectations or habits. In this way, the novelty of each new experience will be fully realized. As the book says, “Abundance is the enemy of appreciation.” This is also true with something as simple as a cappuccino. If you make it a daily ritual, it becomes a habit. If you instead substitute your daily coffee once a week with a froth-covered treat, then it becomes a reward to savor.

3. Buy Time. According to Dunn and Norton, individuals should ask themselves the question, “How will this purchase change the way I use my time?” For example, will it allow you to spend more time with your friends or family, or create more “to-dos” to clog your list? Will it free you up to participate in more activities you enjoy? Investing in products or services that allow you to spend time on the things you love will lead to greater overall well-being. And, say the authors, don’t fall into the trap of putting a dollar value on your time, as this leads to increased stress levels. “Simply feeling like your time is valuable can make it seem scarce.”

4. Pay Now, Consume Later. Paying for a treat or experience up front, such as event tickets you buy months in advance, allows you to benefit from the extended pleasure of eager anticipation. With all due respect to Tom Petty, the waiting, it seems, may be the best part. Conversely, credit cards can be a dangerous, albeit convenient, financial tool, facilitating a “consume now, pay later” dynamic. One study cited in Happy Money found that all 30 people surveyed underestimated their monthly credit-card bills by a sizable average of nearly 30%.

5. Invest in Others. Regardless of your circumstances–wealthy or not, young or old–research finds that spending money on others leads to greater happiness than spending on oneself.

The danger zones

While some experts differ on whether higher incomes result in greater levels of happiness, they tend to agree on the following: Increasing debt levels are detrimental to happiness, and keeping up with the Joneses can lead to a general sense of dissatisfaction. Instead, actively managing debt while finding ways to appreciate what you already have on a day-to-day basis may help you make well-thought-out saving and spending choices that support your overall level of well-being.