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Interested in Fixed Annuities? Beware of Common Misconceptions

 

 

Between your 401(k) or pension, your IRA and Social Security, you hope to have enough to enjoy a comfortable retirement lifestyle. Yet, you may want, or need, to find other financial resources – one of which might be a fixed annuity, which offers a guaranteed interest rate and can be structured to provide a lifetime income stream. But you may be nervous about investing in annuities because of some negative things you’ve heard about them. How concerned should you be?

To help answer that question, let’s consider some common misconceptions about fixed annuities:

“I won’t be able to touch any of my money if I need some of it before I retire.” A fixed annuity is designed to provide you with income during your retirement years. But if you want to withdraw a significant amount of your money before you retire – when your annuity is in what’s called the “accumulation phase” – you’ll likely face a surrender charge, as well as a 10% federal tax penalty. Withdrawals may also be subject to a market value adjustment. However, to access a small percentage of your allocated funds, you might not encounter any fees. And some annuity contracts allow a 10 percent withdrawal with no penalty.

“Annuities cost too much.” Many annuities are actually low in cost. Be sure to compare the cost against the value of each additional guarantee, feature, and benefit—and only pay for what you need.

“A deferred annuity isn’t worth the wait.” If you set up a deferred annuity, it’s true that you won’t immediately start receiving income. You will, however, be able to factor future expected payments into your retirement plan.

“When I die, the insurance company keeps my money.” If your payout plan includes a beneficiary agreement, your beneficiaries will receive the remaining amount of money in the contract. Read the terms and conditions listed with an annuity, as they will spell out where the remaining money will go after you pass away.

Of course, even if the above concerns are simply misconceptions, it doesn’t mean there are no issues about which you must be aware when considering fixed annuities. For one thing, the safety of your lifetime income stream and guarantees will depend on the claims-paying ability of the insurer that issued the annuity, so you’ll want to choose a company that has demonstrated financial strength and stability. One other concern about fixed annuities: They typically don’t carry a cost of living adjustment, such as that found in Social Security. You can find annuities that do offer some inflation protection, but this feature can reduce early payments significantly.

If it’s appropriate for your situation, a fixed annuity can be a valuable addition to your retirement income. Before purchasing one, though, you’ll need to weigh all the potential benefits and issues. But don’t be swayed by misconceptions – you’ll want to base your decision on facts, rather than fears.

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Be Alert for Opportunities When Preparing for College Costs

Now that summer is winding down, it will soon be “back-to-school” time. When children are young, your logistics for the new academic year may involve little more than a trip to buy school supplies. But if you’d like to send your kids (or grandkids) to college someday, you need to plan far ahead to meet the financial demands. And, as part of your planning, you also need to be on the lookout for all opportunities to help pay those sizable college bills.

Specifically, you’ll need to be ready to take action in these areas:

Financial aid – You should start thinking about financial aid at least a year before your child heads off to college. For example, you can begin submitting the Free Application for Federal Student Aid (FAFSA) on Oct. 1, 2019, for the 2020-21 academic year. And if the past is any guide, you’ll always need to remember that Oct. 1 date for the next school year. The FAFSA helps colleges and the U.S. Department of Education evaluate your financial need and determine how much financial support your child requires. And since a lot of financial aid is awarded on a first-come, first-served basis, it’s a good idea to submit your forms as soon as possible once the application period opens.

Scholarships – Colleges and universities offer their own scholarships, but you’re not limited to them. In fact, you might be surprised at the number and variety of college scholarships available to your child or grandchild – but to find them, you may need to do some digging. Find out what’s offered from foundations, religious, ethnic or community organizations, local businesses and civic groups. Also, ask the high school guidance office for information. Your own employer might even offer small scholarships. You can find more information on scholarships on the U.S. Department of Education’s website.

College-specific investments – You might also want to consider an investment designed to help you save for college. You have several options available, each with different contribution limits, rules and tax treatments, so you’ll want to consult with a financial professional to choose an investment that’s appropriate for your situation.

Community colleges – Not every bachelor’s degree needs to begin and end at an expensive four-year college or university. Many students now fulfill some of their “general” education requirements at affordable community colleges before transferring to a four-year school – often saving tens of thousands of dollars in the process.

Paying for college is challenging. After all, for the 2018-19 academic year, the average annual cost (tuition, fees, and room and board) was $21,370 for in-state students at public four-year colleges or universities; for four-year private schools, the corresponding expense was $48,510, according to the College Board. And college costs will likely continue to rise over the next several years. But, as we’ve seen, by being proactive and having a plan in place, you can go a long way toward coping with these expenses and helping your loved ones enjoy the benefits of higher education.

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How Does Social Security Fit Into Your Retirement Income Strategy?

 

 

It might not be on your calendar, but Aug. 14 is Social Security Day. Since it was enacted on Aug. 14, 1935, Social Security has provided some financial support for millions of Americans during their retirement years. While Social Security benefits, by themselves, probably aren’t enough to enable you to retire comfortably, they can be a key part of your overall retirement income strategy – if you use them wisely.

To help you make decisions about Social Security, you will need to answer these questions:

When should I start taking my benefits? You can take Social Security once you reach 62, but if you wait until your full retirement age, which will probably be between 66 and 67, you’ll get much bigger monthly checks, and if you wait until 70, you’ll get the biggest possible payments. Before deciding when to begin receiving your benefits, you’ll need to weigh a few factors, including your estimated longevity and your other sources of income.

How should I consider potential spousal benefits? If you are married, or if you’re divorced but were married for at least 10 years, you could receive up to half of your spouse’s full retirement benefit (offset by your own benefit, and reduced if you claim early). If you outlive your spouse, you could claim survivor benefits, which can provide either your own benefits or 100% of your deceased spouse’s, whichever is larger. Consequently, the higher-earning spouse might want to postpone taking benefits for as long as possible to maximize the survivor benefit.

How much can I earn without reducing my Social Security benefits? If you are younger than your full retirement age and you are receiving Social Security, the Social Security Administration will withhold $1 from your benefits for each $2 you earn over a certain threshold (which, in 2019, is $17,640). For the year you reach your full retirement age, your benefits could be withheld by $1 for every $3 you earn over $46,920. But once you reach your full retirement age, you can earn as much as you want without your benefits being withheld, although your benefits could still be taxed, depending on your income.

How much of my pre-retirement income will Social Security replace? Generally speaking, you should expect Social Security to replace slightly more than a third of your pre-retirement income. However, the higher your income during your working years, the lower the replacement value of Social Security will be.

What other sources of retirement income should I develop?Contribute as much as you can afford to your IRA and your 401(k) or similar employer-sponsored retirement plan. You may want to consult with a financial professional, who can look at your entire retirement income picture and recommend moves to help you achieve the lifestyle you’ve envisioned for your later years.

Keep in mind that your decisions about Social Security filing strategies should always be based on your specific needs and health considerations. For more information, visit the Social Security Administration website at socialsecurity.gov.

One final word: You may have concerns about the stability of Social Security. While no one can predict the future, many potential solutions exist to put the program on more solid footing. Consequently, try to focus on the actions you can control.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

This information is believed to be reliable, but investors should rely on information from the Social Security Administration before making a decision on when to take Social Security benefits. It is general information and not meant to cover all scenarios. Your situation may be different, so be sure to discuss this with the Social Security Administration prior to taking benefits.

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Welcoming a New Child? Consider These Financial Moves

 

If a new child has entered your life, you are no doubt full of joy today and hopes for the future. And you can help make that future a brighter one for your child and your family by taking some important steps in these areas:

  • College – Given the consistently rising costs of higher education, the earlier you start your savings and investment plans, the better off you will likely be. While it may be difficult to set aside money for education when you’re still a young family, planning to cram at the last minute is not a good idea. Time is one of your biggest assets, and delaying even a few years can have a big effect on your portfolio’s value.
  • In addition, just like regular attendance is crucial for success in school, setting aside money every month can help make a difference in reaching your family’s education savings goals. Developing a strategy for achieving your education savings goal can help you stay on track. And if you have other goals, such as saving for retirement, it’s important to address how they fit into your overall financial strategy.
  • Insurance – If you did not have life insurance before, you may want to consider it now. Ask yourself: If something happened to me, would my child be able to stay in the same house? Receive an education? Enjoy a comfortable lifestyle? Even if you have an actively involved co-parent with a steady income, it still might not be enough to take care of your child in the way you would have wanted. Consequently, you may need life insurance – and you might need other types of protection, too, such as disability insurance.
  • Estate plans – With luck, you will live to see your children as adults who have found their way in the world. Still, it’s best to be prepared for anything – which means you should draw up your estate plans well before they are likely to be needed. Among other things, you may want to name someone to serve as your child’s guardian if you – and your co-parent, if one is involved – are not around. And because a minor generally cannot inherit money or property, you may also want to appoint a conservator to act as a guardian over whatever financial assets your child might inherit until the child is of age, which will be 18 or 21, depending on where you live. Your legal professional can help you determine whether you should write a will and possibly create other estate planning documents, such as a living trust.

Even when you devote the time and money necessary to your new child, you can’t forget about yourself and your own needs – in particular, you must save and invest for retirement. Contribute as much as you can afford to the retirement accounts available to you, such as your 401(k) and IRA. After all, the more you put away, the less likely the need for your child to help support you later in life./p> 

You’ll have much to think about when you welcome a new child to your family but by taking the time to make the appropriate financial moves, you can help make the transition a positive one.

 

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Don't Chase Last Year's Mutual Fund Category Winners

 

 

The world of mutual funds can be confusing. With more than 9,000 funds on the market, how can you choose the ones that are right for you?

One way to start is by considering the various categories of mutual funds – and there are quite a few of them: Small Cap Growth, Large Cap Growth, Large Cap Value, Diversified Emerging Markets, Foreign Large Cap Blend and more – the list is extensive, and for many people, confusing.

However, with a little study, you can understand why these funds have their names – for example, a Small Cap Growth fund will contain stocks of smaller companies thought to offer growth potential. Once you know the goals of different categories of mutual funds, you can determine which ones fit into your overall investment strategy.

This is important, because you want to ensure your portfolio is appropriately diversified. For example, if you find that almost all of your mutual funds come from the above-mentioned Small Cap Growth category, you may be taking on more investment risk than you’d like, because funds that offer the greatest growth possibilities also usually carry the highest degree of market volatility. Typically, you may be better off owning an array of mutual funds drawn from several different categories, with the percentage each category occupies in your portfolio based on your goals, risk tolerance and time horizon. (Keep in mind, though, that while diversification can help reduce the effects of volatility, it doesn’t guarantee a profit or protect against losses in a declining market.)

You might be tempted to choose categories by looking at which most recently outperformed the others, and just stick with those groups. But is this a good idea?

It probably isn’t – and the main reason you shouldn’t chase performance this way is things change very quickly in the mutual funds arena. It’s quite possible – and has happened many times – that the top category last year can fall into one of the worst-performing ones this year, and vice versa. Consequently, your efforts to capture a winning trend may be futile.

Of course, within the context of investing in various mutual fund categories, you still need to choose individual funds. And, as is the case with categories, you might be tempted to give considerable weight to a fund’s track record. But, similar to the situation with fund categories, “chasing performance” is typically not a good strategy – after all, last year’s “hot” fund may have cooled off considerably this year. Nonetheless, reviewing a fund’s longer-term track record can help you understand how it might perform through the ups and downs of the financial markets. Always keep in mind, though, that past performance can’t guarantee how the fund will perform in the future.

Mutual funds are popular investments – and for good reason. Since each fund generally contains dozens of securities, you get a degree of diversification you can’t achieve from owning individual stocks or bonds. And, as discussed above, you can diversify further by owning funds from several categories. Just remember, though, that as you build your mutual fund portfolio, don’t get caught up in last year’s results – because old news just may not be that relevant today.

Mutual fund investing involves risk. Your principal and investment return in a mutual fund will fluctuate in value. Your investment, when redeemed, may be worth more or less than the original cost.

 

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Estate Plans Can Help You Answer Questions About the Future

 

 

The word “estate” conjures images of great wealth, which may be one of the reasons so many people don’t develop estate plans – after all, they’re not rich, so why make the effort? In reality, though, if you have a family, you can probably benefit from estate planning, whatever your asset level. And you may well find that a comprehensive estate plan can help you answer some questions you may find unsettling – or even worrisome.

 

Here are a few of these questions: 
 

What will happen to my children? With luck, you (and your co-parent, if you have one) will be alive and well at least until your children reach the age of majority (either 18 or 21, depending on where you live). Nonetheless, you don’t want to take any chances, so, as part of your estate plans, you may want to name a guardian to take care of your children if you are not around. You also might want to name a conservator – sometimes called a “guardian of the estate” – to manage any assets your minor children might inherit. 
 

Will there be a fight over my assets? Without a solid estate plan in place, your assets could be subject to the time-consuming, expensive – and very public – probate process. During probate, your relatives and creditors can gain access to your records, and possibly even challenge your will. But with proper planning, you can maintain your privacy. As one possible element of an estate plan, a living trust allows your property to avoid probate and pass quickly to the beneficiaries you’ve named. 
 

Who will oversee my finances and my living situation if I become incapacitated? You can build various forms of protection into your estate planning, such as a durable power of attorney, which allows you to designate someone to manage your financial affairs if you become physically or mentally incapacitated. You could also create a medical power of attorney, which allows someone to handle health care decisions on your behalf if you become unable to do so yourself. 
 

Will I shortchange my family if I leave significant assets to charities? Unless you have unlimited resources, you’ll have to make some choices about charitable gifts and money for your family. But as part of your estate plans, you do have some appealing options. For example, you could establish a charitable lead trust, which provides financial support to your chosen charities for a period of time, with the remaining assets eventually going to your family members. A charitable remainder trust, by contrast, can provide a stream of income for your family members for the term of the trust, before the remaining assets are transferred to one or more charitable organizations. 
 

As you can see, careful estate planning can help you answer many of the questions that may be worrying you. Be aware, though, that certain aspects of estate planning, especially those related to living trusts and charitable trusts, can be complex, so you should consult your estate-planning attorney or qualified tax advisor about your situation. But once you’ve got your plans in place, you should be able to face the future with greater clarity and confidence. 

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Life Events Can Lead You to See a Financial Advisor

 

Over the years, you’ll experience many personal and professional milestones. Each of these can be satisfying, but they may also bring challenges – especially financial ones. That’s why you may want to seek the guidance of a financial professional. Here are some of the key life events you may encounter, along with the help a financial advisor can provide: 
 

New job – When you start a new job, especially if it’s your first “career-type” one, you may find that you have several questions about planning for your financial future, including your retirement. You may have questions about how much you should contribute to your employer-sponsored retirement plan. What investments should you choose? When should you increase your contributions or adjust your investment mix? A financial advisor can recommend an investment strategy that’s appropriate for your goals, risk tolerance and time horizon. 
 

Marriage – Newlyweds often discover they bring different financial habits to a marriage. For example, one spouse may be more of a saver, while the other is more prone to spending. And this holds true for investment styles – one spouse might be more risk-averse, while the other is more aggressive. A financial advisor can help recommend ways for you and your spouse to find some common ground in your saving and investment strategies, enabling you to move forward toward your mutual goals. 
 

New child – When you have a child, you will need to consider a variety of financial issues. Will you be able to help the child someday go to college? And what might happen to your child, or children, if you were no longer around? A financial advisor can present you with some college-savings options, such as an education savings plan, as well as ways to protect your family, such as life insurance. 
 

Career change – You may change jobs several times, and each time you do, you’ll need to make some choices about your employer-sponsored retirement plan. Should you move it to your new employer’s plan, if transfers are allowed? Or, if permitted, should you keep the assets in your old employer’s plan? Or perhaps you should roll over the money into an IRA? A financial advisor can help you explore these options to determine which one is most appropriate for your needs. 
 

Death of a spouse – Obviously, the death of a spouse is a huge emotional blow, but it does not have to be a financial one – especially if you’ve prepared by having the correct beneficiary named on retirement accounts and life insurance policies. Your financial advisor can help ensure you have taken these steps. 
 

Retirement – Even after you retire, you’ll have some important investment decisions to make. For one thing, you’ll need to establish a suitable withdrawal strategy so you don’t deplete your retirement accounts too soon. Also, you still need to balance your investment mix in a way that provides at least enough growth potential to keep you ahead of inflation. Again, a financial advisor can help you in these areas. 
 

No matter where you are on your journey through life, you will need to address important financial and investment questions, but you don’t have to go it alone – a financial professional can help you find the answers you need.

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Smart Financial Moves for Every Stage of Life

 

 

Regardless of what stage of life you're in, you must make financial and investment decisions that will be with you for the remainder of your years. But the moves you make when you’re just starting out in your career may be quite different from when you’re retired. So, let’s look at some of these moves, stretched out across your lifetime. 
 

In your 20s and 30s: During this period, you should strive to place yourself on a sound financial footing by taking steps such as reducing, and hopefully eliminating, your student loans and embarking on saving for retirement through investments such as a 401(k) and IRA. You also might buy a home, which offers some financial benefits, but be careful not to become “house poor” by devoting too much of your monthly income to mortgage payments. If you have young children, you might also want to start saving for college, possibly through a 529 plan, which offers tax benefits, high contribution limits and the ability to switch beneficiaries, as needed. And if you do have a family, you’ll certainly need to maintain adequate life insurance. 
 

Also, since you’re at the early stages of your working life, you should chart a long-term financial and investment strategy with the help of a financial professional. Your strategy should encompass your important goals, risk tolerance and time horizon. And you’ll want to revisit your strategy regularly to accommodate changes in your life and financial situation. 
 

In your 40s and 50s: These are the years in which your career advances, leading to bigger salaries. The more you earn, the more you should be putting away in your 401(k) or other employer-sponsored retirement plan, along with your IRA. During the middle-to-end of this particular period, you might finish helping pay for your child’s higher education – which should free up even more money to put away for retirement. You also may want to consider long-term care insurance, which can help protect you against the devastating costs of an extended stay in a nursing home. 
 

In your 60s, 70s … and beyond: Once you’re in this age range, chances are pretty good that you’ll either retire soon or are already retired. (Although, of course, you may well want to work part-time or do some consulting.) However, you certainly haven’t “retired” the need to make financial and investment decisions, because you’ll have plenty, including these: When should I take Social Security? Will my investment portfolio provide me with enough income to help keep me ahead of inflation? How much can I afford to withdraw each year from my retirement accounts without outliving my resources? Again, a financial professional can help you deal with these and other issues. 
 

Also, if you haven’t done so, now is the time to draw up your estate plans, so you can leave the type of legacy you desire – one that provides for the next generation (or two) and the charitable organizations you support. You’ll need to work with a legal professional to create estate planning documents and arrangements appropriate for your needs.

You will spend a lifetime making financial and investment decisions – so put in the time and effort, and get the help you need, to make the best decisions you can. 

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Father's Day: Tools Are Great for Father's Day – and for Investors

 

If you’re a dad, you may well be pleased to unwrap some tools as Father’s Day gifts. Of course, it might be a stereotype that all men are handy at repairs; women certainly can be every bit as good when it comes to building and fixing things. In fact, the construction process is valuable for anyone to learn – and the same skills that go in to creating and mending physical objects also can be applied to financial projects – such as working toward a comfortable retirement.

Here are a few of those skills:

Diagnosing the challenge –

A good craftsperson knows that the first step toward accomplishing any outcome is to assess the challenge. So, for example, if you want to build some bookshelves right into the wall, you’ll need to locate the wall studs, determine if you have adequate space for the shelving you want and allow room for future expansion. Similarly, if you want to retire at a certain age, you need to consider the key variables: your current and future income (How much can you count on from your retirement plans?), where you'll live (Will you downsize or relocate? Will you rent or own a house or condominium?) And what you'll do as a retiree (Will you travel extensively or stick close to home? Will you do some type of work for pay or pursue your hobbies and volunteer?).

Assembling the right tools and materials –

To put together your bookshelf, you will need the right tools – saw, hammer, drill, sander and so on – and the right building materials – plywood, nails, screws, glue, brackets, moldings and so on. And to work toward a comfortable retirement, you'll also need the right tool – in the form of a long-term financial strategy, based on your specific retirement goals, risk tolerance and time horizon – along with the appropriate materials – the mix of investments you use to carry out that strategy. These investments include those you’ve placed in your IRA, your 401(k) or other employer-sponsored retirement plan, and those held outside your formal retirement accounts. Ideally, you want a diversified mix of investments capable of providing growth potential over time, within the context of your individual risk tolerance.

Review your work –

Once you’ve finished your bookshelf, you occasionally may need to make some minor adjustments or repairs in response to slippage, cracks or other issues that can develop over time. As an investor, you also may need to tweak your financial strategy periodically and adjust your investment mix – not necessarily because something is broken, but to accommodate changes in your life, such as a new job, new family situation and new goals. Furthermore, over time, your risk tolerance may change, and this needs to be reflected in your array of investments..

Consequently, conducting an annual portfolio review with your financial professional should be a priority.

Tools are a big deal on Father’s Day. But the construction-related tasks they represent, physically and symbolically, go beyond any one holiday and can be used by anyone interested in working toward a solid financial future.

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Do You Have a Business Succession Strategy?

 

 

If you own a business, you’ve always got plenty to think about: sales, marketing, employees, competition, industry trends, consumer preferences – the list goes on and on. It’s easy to get so caught up in your work that you might not take time to think about retirement. But if and when that day arrives, you’ll want to be prepared – which means you need a business succession plan.

 

And you will have to put considerable thought and effort in selecting such a plan, because you’ve got several choices. You could keep the business in your family. You could offer it to an employee or an outsider. You could design a plan that will take effect while you’re alive or after you’ve passed away. Your decision should be based on several factors, including your family situation, the nature of your business, and your overall financial position (including the composition of your investment portfolio), but, at the outset of your search, you may want to know about some popular succession strategies, including:

Giving the business away – You can leave your business to your children, but if you transfer it during your lifetime, you may be able to obtain some valuable benefits. For example, by relinquishing control gradually, you can be reassured that your children will be able to manage the business on their own. This strategy may also offer tax benefits. You can give your business away outright, but you may want to consider using a trust or family limited partnership, both of which may allow you to control the business for as long as you want, while still receiving a regular income stream.

 

Selling the business outright – You can always sell your business outright whenever you like – right now, when you retire or some time in between. Of course, any sale brings tax considerations.

 

Using a buy-sell arrangement to transfer the business – Instead of simply selling the business in a traditional transaction, you could employ a buy-sell agreement. With this arrangement, you can generally determine when, to whom, and at what price you can sell it. If you would like to keep the business in your family, you may be able to fund the buy-sell agreement with life insurance, so family members could use the death benefit to buy your ownership stake.

 

Buying a private annuity – When you buy a private annuity, you can transfer the business to family members, or someone else, who will then make payments to you for the rest of your life, or, possibly, for your lifetime and that of a second person’s. In addition to potentially providing you with a lifetime income stream, this type of sale can remove assets from your estate without triggering gift or estate taxes.

 

These and other techniques can be complex, so before deciding on what is best for your situation, you’ll want to consult with your tax, legal and financial advisors. By taking your time and getting the professional help you need, you can make a successful succession choice.

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Time to 'Cycle' through Some Investment Ideas

 

 

If you’ve noticed an increase in bicycle-related events lately, it may be because May is recognized as “Bike Month” – and some cities even observe a specific Bike Week. Of course, bicycling is good exercise and an environmentally friendly method of transportation, but it can also teach us some lessons about investing.

Here are a few to consider:

Put the brakes on risky moves. To keep themselves safe, experienced cyclists regularly do two things: They keep their brakes in good shape and they don’t take unnecessary risks, such as whipping around blind curves. As an investor, you can combine these two actions by putting your own “brakes” on risky moves. For example, if you’re tempted to buy some hot investment you heard about, you may want to think twice before acting. Why? In the first place, most “hot” investments don’t stay hot for too long, and may be cooling off by the time you hear of them. And even more important, they might not be appropriate for either your risk tolerance or your need to diversify your portfolio. When you invest, you can’t eliminate all risks, but you can reduce them by avoiding impulsive moves and sticking with a disciplined, long-term strategy based on your needs and goals. 
 

Get regular financial tune-ups. Avid cyclists keep their bikes in good shape through regular maintenance. When you invest, you usually don’t need to make a lot of drastic moves, but you should periodically “tune up” your investment portfolio, possibly with the help of a financial professional, during regular reviews. Such a tune-up may involve any number of steps, but the main goal is to update your portfolio so it reflects where you’re at in life – your goals, risk tolerance, earnings and family situation. 
 

Protect yourself from bumps in the road. All serious bicyclists – and all bicyclists serious about keeping their heads intact – wear helmets when they are riding, because they know the dangers of rough terrain. Likewise, you need to protect yourself from the bumps in the road that could impede your progress toward your objectives. For starters, life insurance can help your family meet some essential needs – pay the mortgage, educate children, and so on – in case something were to happen to you. And you may need disability insurance to replace your income temporarily if you became injured or ill and can’t work for a while. Also, you might want long-term care insurance, which can help you guard against the potentially catastrophic costs of an extended stay in a nursing home or the services of a home health care worker. 
 

Don’t stop pedaling. When going long distances, bicyclists ride through rain, wind, sun and mosquitoes. They elude angry motorists and they change flat tires. In short, they persist in reaching their destinations. As an investor, you will pursue some goals that you may not reach until far in the future, such as a comfortable retirement, so you too need to demonstrate determination and persistence by continuing to invest, in good markets and bad, through unsettling political and global events – and even despite your own occasional doubts. 
 

Whether you’re an avid cyclist or not, following these principles can help keep your financial wheels moving along the road to your goals. 

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Why Should Recent Graduates Care About Retirement Planning?

 

 

If you’ve graduated from college in the past year or so and started your first job, you’re no doubt learning a lot about establishing yourself as an adult and being responsible for your own finances. So thoughts of your retirement are probably far away. And yet you have several good reasons to invest in your 401(k) or similar employer-sponsored retirement plan.

 

First of all, by contributing to your 401(k), you can get into the habit of regular investing. And since you invest in your 401(k) through regular payroll deductions, it’s an easy way to invest.

Furthermore, your 401(k) or similar plan is an excellent retirement-savings vehicle. You generally contribute pre-tax dollars to your 401(k), so the more you put in, the lower your taxable income. Plus, your earnings can grow on a tax-deferred basis. Your employer might also offer a Roth 401(k), which is funded with after-tax dollars; although you can’t deduct your contributions, your earnings can grow tax-free, provided you meet certain conditions. And with either a traditional or Roth 401(k), you generally have a wide array of investment options.

 

But perhaps the main reason to start investing right away in your 401(k) is that, at this point of your life, you have access to the greatest and most irreplaceable asset of all – time. The more time you have on your side, the greater the growth potential for your investments. And by starting to invest early in your plan, you can put in smaller amounts without having to play catch-up later.

 

Suppose, for example, you begin investing in your 401(k) or similar plan when you’re 25. For the sake of simplicity, let’s say you put in $100 a month, and you keep investing that same amount for 40 years, earning a hypothetical 7 percent rate of return. When you reach 65, you will have accumulated about $256,000. (Your withdrawals will then be taxable, unless you chose the Roth 401(k) option.) But if you waited until you were 45 before you started investing in your 401(k), again earning that hypothetical 7 percent, you’d have to put in almost $500 per month – about five times the monthly amount you could have invested when you were 25 – to arrive at the same $256,000 when you turn 65.

 

Clearly, the expression “time is money” applies when it comes to funding your 401(k) – there’s just no benefit in waiting to contribute to your retirement plan. This isn’t to say that you have a lot of disposable income, especially as you may be paying off thousands of dollars in student loans. But, as mentioned above, the money for your 401(k) is taken before you even see it, so, in a sense, you won’t miss it. And you can certainly start out with small amounts, though you’ll at least want to put in enough to earn your employer’s matching contribution, if one is offered. As your career progresses and your salary goes up, you can steadily increase the amount you put into your 401(k) or other retirement plan.

 

When retirement is decades away, it can seem like more of an abstract concept than something that will one day define your reality. But, as we’ve seen, you have plenty of incentives to contribute to your 401(k) or similar plan – so, if you haven’t already done so, get started soon. 

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Fixed Annuity Could Help Extend Lifespan of Retirement Accounts

 

 

It’s almost impossible to save too much for retirement. After all, you could spend two, or even three, decades as a retiree. And retirement is not cheap – even if you maintain a relatively modest lifestyle, some of your expenses, especially those involving health care, may continue to rise over the years. Consequently, you will need several sources of reliable income – one of which might be a fixed annuity.

 

Fixed annuities are essentially contracts between investors and insurance companies. When you purchase a fixed annuity, the insurer will guarantee the principal and a minimum rate of interest. This means the money you invest in a fixed annuity is designed never to drop in value. (However, this guarantee is based on the claims-paying ability of the insurer that issues the annuity.)

 

You can structure a fixed annuity to pay you for a certain number of years or for your entire lifetime, which is the route many people choose. This is advantageous not only because of what it provides you – income for life – but because it also may allow you to take out less money each year from your other retirement accounts.

 

Here’s some background: Once you turn 70½, you are required to begin taking withdrawals from your traditional IRA and your 401(k) or similar employer-sponsored retirement plan. (This requirement does not apply to Roth IRAs.) You must take out a minimum amount, based on your age and account balance, but you are free to exceed that amount each year. But the more you withdraw from these accounts, the faster they are likely to be depleted. So, when you reach retirement, it’s a good idea to establish an appropriate annual withdrawal rate, based on your retirement plan balances, Social Security, lifestyle, longevity expectations and other factors. You may want to work with a financial professional to determine a withdrawal rate that’s suitable for your needs.

 

If you can count on the income from a fixed annuity, you might be able to take out less each year from your traditional IRA and 401(k), giving these accounts more tax-deferred growth opportunities. Plus, if you don’t withdraw all the money from these accounts during your lifetime, you can include the remainder in your estate plans.

 

A fixed annuity’s potential to help you extend the lifespan of your IRA and 401(k) can clearly be of value to you. Still, a fixed annuity does carry some issues about which you should be aware, such as surrender charges for early withdrawals, along with other fees. Also, if you take withdrawals before you reach 59½, you likely will face a 10% penalty. And annuities can have tax implications, so before you start taking withdrawals, you will want to consult your tax advisor.

Is a fixed annuity appropriate for you? There’s really no one correct answer because everyone’s situation is different. However, if you consistently max out your IRA and 401(k) contributions, and you still have money left to invest for retirement, you might want to think about an annuity. An income stream you can’t outlive – and that may help you protect your other retirement accounts – is worth considering.

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Earth Day Offers Valuable Lessons to Investors

On April 22, millions of people will observe Earth Day by participating in events that support environmental protection. As a citizen, you may want to take part in a local celebration. And as an investor, you can learn a few lessons from the themes of Earth Day.

 

Here are a few of them:

Avoid a toxic investment environment. A recurring topic of Earth Day is the necessity of reducing toxins from our air, water and land. And, while you might not think of it in those terms, your portfolio can also contain some “toxic” elements in the form of investments that may be hindering your progress, or, at the very least, not contributing to it. For instance, you might own some investments that, for one reason or another, have consistently underperformed, or are now too aggressive for your risk tolerance, which can change over the years. In these cases, you might be better off selling the investments and using the proceeds for other, more appropriate ones.

 

Look for sources of renewable energy. Efforts to protect our environment include a push for more renewable energy sources, such as solar and wind. As an investor, you, too, can look for “renewables” in the form of investments that keep paying you back in one way or another. Of course, the most basic example would be a bond, which pays you regular interest until the bond matures and you get your principal back, provided the issuer doesn’t default, which is generally unlikely with an investment-grade bond. However, you also may want to consider another type of renewable – dividend-paying stocks. By reinvesting these dividends, you can increase the number of shares you own – and share ownership is a good way to help build your portfolio. Some companies have paid, and even increased, their dividends many years in a row, but keep in mind they’re not obligated to do so.

 

Plant seeds of opportunity. Some Earth Day events involve planting trees – many of which won’t be fully grown for decades. When you invest, you are planting seeds in the form of investments you hope will grow over the years. Of course, you will likely see some volatility along the way, but over the long term, investments with strong fundamentals may reward you for your patience

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Apart from these ideas, you also can connect the idea of helping protect the environment with investing for your goals. Through socially responsible investing, you can screen out investments in companies whose products you find objectionable, while supporting businesses whose work you believe helps contribute to a better world. And you can find investments, such as mutual funds that emphasize social responsibility, whose returns are competitive, so you don’t have to sacrifice growth potential for your principles.

 

In the nearly 50 years since Earth Day celebrations began, we have taken steps to improve many aspects of our physical world, although the work continues. And by following some of the same techniques, you can improve your investment environment, too.

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What Can You Do With Your Tax Refund?

 

 

We’re getting close to the tax-filing deadline. For many of us, this means it’s that time of year when we get our biggest financial windfall – a tax refund. If you have recently received a refund, or are expecting to get one in the next few weeks, what should you do with it?

 

Of course, you could just spend the money on something you want, but if you’d like to maximize the financial benefits from your refund, you might want to consider other options, including the following:

 

Invest the money. In 2018, the average tax refund was about $2,700. For this year, it might be somewhat lower, due to changes in the tax laws and the failure of taxpayers to adjust their withholdings in response. However, if you were to receive in the neighborhood of $2,700, you’d be almost halfway to the annual IRA contribution limit, which, in 2019, is $6,000. (If you’re 50 or older, you can put in up to $7,000). If you have already “maxed out” on your IRA, you could use your refund to fill in gaps you may have in other parts of your investment portfolio.

 

Pay insurance premiums. Let’s face it – nobody really likes paying insurance premiums. Yet, if you have anyone depending on you, you will certainly need life insurance, and possibly disability insurance as well. And if you want to help protect your financial resources later in life from threats such as an extended – and hugely expensive – stay in a nursing home, you also may want to consider long-term care insurance. Your tax refund could help pay for some of these premiums, boosting your cash flow during the months you would normally be making these payments.

 

Contribute to a college fund. It’s never too soon to begin saving for college, which has grown increasingly expensive over the last several years. So, if you have young children, you may want to think about investing some or all of your refund into a college-savings account, such as a tax-advantaged 529 plan.

 

Pay off debts. You might be able to use your refund to pay down some debts – or perhaps even pay off some of your smaller ones. The lower your monthly debt load, the more money you will have available to invest for the future. Keep in mind, though, that you might not want to look at all debts in the same way. For example, putting extra money toward your mortgage might help you pay it off faster, but you’ll also be funding an asset – namely, your house – that might not provide you with the same liquidity as you can get from investments such as stocks and bonds.

 

Help build an emergency fund. By building an emergency fund containing six to 12 months’ worth of living expenses, you can help yourself avoid dipping into your long-term investments to pay for large, unplanned-for bills, such as a major car repair or an expensive dental procedure. Your tax refund could help build such a fund, with the money ideally being placed in low-risk, liquid vehicles.

 

Clearly, you can help yourself make progress toward a number of your financial goals with your tax refund – so put it to good use.

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Try to Avoid "Titanic" Investment Mistakes

 

 

It's been 107 years this month since the tragedy of the Titanic. Of course, this disaster has fascinated the world ever since, leading to books, movies, musicals and, ultimately, a successful search for the big ship’s remains. On the positive side, commercial shipping lines learned a great deal from the Titanic, resulting in safer travel across the oceans. And as an investor, you, too, may be able to draw some important lessons from what happened on that cold April night more than a century ago.

 

So, to avoid some “titanic” investment mistakes, consider the following:

 

Create a financial strategy with a solid foundation. Although considered a technological marvel, the Titanic had some real structural, foundational flaws – such as compartments that weren’t fully watertight. To withstand the inevitable rough seas ahead, your investment strategy needs a strong foundation, based on your needs, goals, family situation, risk tolerance and time horizon.

 

Be receptive to advice. The Titanic’s crew had received plenty of Marconi wireless warnings from other ships about ice in the area. Yet they did not take precautions, such as slowing down. When you invest, you can benefit from advice from a financial professional – someone who can caution you when you’re making dangerous moves, such as pursuing inappropriate investments, which could ultimately damage your prospects for success.

 

Be prepared for anything. The Titanic had far fewer lifeboats than it needed, resulting in a tragic loss of life that could have been prevented. As an investor, you need to be prepared for events that could jeopardize your financial well-being, and that of your family. So, at a minimum, you need to maintain adequate life and disability insurance. And it’s also a good idea to build an emergency fund containing six to 12 months’ worth of living expenses, with the money kept in a liquid, low-risk account.

 

Don’t overreact to perceived threats. When the iceberg loomed directly ahead, the Titanic’s crew frantically tried to steer clear of it. While this move was understandable, it inadvertently hastened the ship’s demise, because it exposed a more vulnerable part of the hull to the huge ice mass. When you invest, you might also be tempted to overreact when facing perceived dangers – for example, if the financial markets plunge, you might think about selling your stocks. This is often a bad idea, especially if you’re taking a big loss on your sales. If your investments are still fundamentally solid, you might well be better off by staying patient and waiting for the markets to recover.

 

Give yourself time to reach your goals. Edward J. Smith, the Titanic’s captain, apparently wanted to break speed records on the Atlantic crossing – and this desire may have contributed to his somewhat reckless passage through fields of ice. As an investor, you could also run into problems if you rush toward a goal. To illustrate: If you wanted to retire at 65 with a certain amount of money, but you didn’t start saving and investing until you reached 55, you’d likely have to put a lot more away each year, and possibly invest a lot more aggressively, than if you had started investing when you were 30.

Put to work some of the Titanic’s lessons – they might help you improve your chances of smooth sailing toward all your important financial goals.

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Time for Some Financial Spring Cleaning

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Spring is here – and for many of us, that means it’s time for some spring cleaning. This year, in addition to tidying up your home, why not try brightening your financial environment? Some of the same moves you make to clean your surroundings may apply to your finances. Consider these suggestions:

 

Get rid of clutter. When you go through your closets, attic, basement or other areas, you may find many items you no longer need. You might be able to sell some of these things or find other ways of disposing of them. And as you review your portfolio, you might also encounter “clutter” in the form of investments that may be redundant to others you own. If so, you might consider selling these investments and using the proceeds to purchase new ones, which may help you broaden your portfolio.

 

Protect yourself from hazards. As you go about your spring cleaning, you may well encounter hazardous substances, such as cleaning agents, paints, batteries, pesticides and so on, which you don’t need anymore and which may pose potential health risks. You can reduce the possible danger from these materials by recycling or disposing of them in an environmentally safe way. Your overall financial situation has hazards, too, in the form of illness or injury preventing you from working, or, in your later years, the need for some type of long-term care, such as an extended stay in a nursing home. To protect yourself, you may need appropriate insurance, including disability and long-term care.

 

Find new uses for existing possessions. When you are sprucing up your home, you may rediscover uses for things you already have. Who knows – perhaps that treadmill that’s been gathering dust in your garage could actually be employed again as part of your rededicated exercise regimen. And you might be able to get more mileage out of some of your existing investments, too. Suppose, for instance, that some of your stocks are paying you dividends, which you take as cash. If you don’t really need this income to support your lifestyle, you might consider reinvesting the dividends so that you can own more shares of the dividend-paying stocks. Over the long run, increased share ownership is a key to helping build your portfolio.

 

Establish new habits. Spring cleaning doesn’t have to be just about physical activities – it can also involve a new set of habits on your part. For example, instead of placing your unread magazines in an ever-expanding pile, try to read and recycle them quickly. You can also develop some positive habits as an investor, such as “paying yourself first” by regularly putting some money in an investment account each month, even before paying all your bills. You can also avoid some bad habits, such as overreacting to market downturns by selling investments to “cut your losses,” even though those same investments may still have strong growth potential and may still be suitable for your needs.

 

Doing some spring cleaning can make you feel better about your living space today. And applying some of these techniques to your financial situation can help you gain a more positive outlook for tomorrow.

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Put Together a Professional Team to Help You Reach Your Goals

As you work toward achieving your goals in life, you will need to make moves that contain financial, tax and legal elements, so you may want to get some help – from more than one source.

Specifically, you might want to put together a team comprised of your financial advisor, your CPA or other tax professional, and your attorney. Together, this team can help you with many types of financial/tax/legal connections.

 

For starters, you may decide, possibly upon the recommendation of your financial advisor, to sell some investments and use the proceeds to buy others that may now be more appropriate for your needs. If you sell some investments you’ve held for a year or less and realize a capital gain on the sale, the gain generally will be considered short-term and be taxed at your ordinary income tax rate. But if you've held the investments for more than a year before selling, your gain will likely be considered long-term and taxed at the lower, long-term capital gains rate, which can be 0%, 15% or 20%, or a combination of those rates.

 

On the other hand, if you sell an investment and realize a capital loss, you may be able to apply the loss to offset gains realized by selling other, more profitable investments and also potentially offset some of your ordinary income. So, as you can see, the questions potentially raised by investment sales – "Should I sell?" "If so, when?" "If I take some losses, how much will they benefit me at tax time?" – may also be of importance to your tax advisor, who will need to account for sales in your overall tax picture. As such, it’s a good idea for your tax and financial advisors to communicate about any investment sales you make.

 

Your tax and financial advisors also may want to be in touch on other issues, such as your contributions to a retirement plan. For example, if you are self-employed or own a small business, and you contribute to a SEP-IRA – which is funded with pre-tax dollars, so the more you contribute, the lower your taxable income – your financial advisor can report to your tax advisor (with your permission) how much you’ve contributed at given points in a year, and your tax advisor can then let you know how much more you might need to add to move into a lower tax bracket, or at least avoid being bumped up to a higher one. Your financial advisor will be the one to recommend the investments you use to fund your SEP-IRA.

 

Your financial advisor can also help you choose the investment or insurance vehicles that can fund an estate-planning arrangement, such as an irrevocable living trust. But to establish that trust in the first place, and to make sure it conforms to all applicable laws, you will want to work with an attorney experienced in planning estates. Your tax professional may also need to be brought in. Again, communication between your various advisors is essential.

 

These are but a few of the instances in which your financial, tax and legal professionals should talk to each other. So, do what you can to open these lines of communication – because you’ll be one who ultimately benefits from this teamwork.

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Who Can You Trust to Reduce Stress of Estate Planning?

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When it’s time to do your estate planning – and it’s actually never too soon to begin – you may find the process, at first, to be somewhat bewildering. You’ll have many questions: What sort of arrangements should I make? Who should get what? And when? How can you address these and other issues?

You’ll need to get some help. In drawing up your estate plan, you will need to work with an attorney. And for guidance on the investments that can help fund your estate planning arrangements, such as a living trust, you can draw on the help of a financial advisor. You also may want to connect with a trust company, which can help facilitate your estate plans and coordinate the activities of your legal and financial professionals.

 

Of course, you might think that only the very wealthy need a trust company. But that’s not really the case – people of many income levels have long used these companies. As long as you have a reasonable amount of financial assets, you likely can benefit from the various services provided by a trust organization.

 

And these services can range from administration of a variety of trusts (such as living trusts and charitable trusts) to asset-management services (bill-paying, check-writing, etc.) to safekeeping services (such as providing secure vaults for jewelry and collectibles).

 

In short, using a trust company can make things a lot easier when it’s time to plan and execute your estate. A trust company can help you in the following ways:

 

Avoiding family squabbles – It’s unfortunate, but true: Dividing the assets of an estate can cause ill will and turmoil among family members. But a trust company can act as a neutral third party, thus minimizing any feelings of unfairness.

 

Providing greater control – When you establish an arrangement such as a living trust, administered by the trust company, you can give yourself great control over how you want your assets distributed. For example, you can specify that a certain child receive portions of your estate spaced out over several years – a move that may appeal to you if you think this child might not be ready to handle large sums all at once.

 

Saving time and effort – As mentioned above, when you work with a trust company, you can let it do all the “legwork” of coordinating your plans with your financial professional, tax advisor and attorney. And these professionals are used to dealing with trust companies.

 

Gaining Protection – Trust companies assume fiduciary responsibility for your financial well-being – which means that your best interests will always be considered in each service and transaction performed.

You can choose from among a variety of trust companies, large and small. Before choosing one, you may want to check out the services and fees of a few different firms. In any case, as you move toward that time of your life when estate planning becomes more essential, talk to your attorney, tax advisor and financial professional about whether using the services of a trust company might be right for you.

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Women May Need to Make Extra Financial Moves

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International Women’s Day will be observed on March 8. Around the world, special events will celebrate the cultural, social, political and economic achievements of women. However, this last area – economic progress – is one that still causes concern, and rightfully so, because women still face gender-related challenges. How can you deal with them?

 

To begin with, you need to recognize the nature of these challenges. While many factors are actually responsible for women facing more economic pressure than men, two stand out in particular:

 

Gender wage gap – It’s still around, despite some progress toward equality. The U.S. Census Bureau has found that full-time, year-round working women earn about 80% of what their male counterparts earn. Other studies show a slightly smaller gap.

 

Caregiving responsibilities – Women typically take more time away from the workforce than men, both to raise children and then, later in life, to take care of aging parents. These absences can result in lost wages, lower Social Security benefits and fewer contributions to 401(k) and similar retirement plans.

So, given these realities, what can you do to improve your own financial outlook? Here are a few suggestions:

 

Increase your contributions to your retirement plan. Every time your salary goes up, increase the amount you contribute to your 401(k) or similar retirement plan. At a minimum, put in enough to earn your employer’s match, if one is offered. These plans offer potential tax-deferred earnings, and since your contributions are typically made with pre-tax dollars, the more you put in, the lower your taxable income.

 

Invest for growth. Some studies show that men may invest more aggressively than women – though not necessarily more successfully. However, while you do need to invest wisely, you can’t ignore the need for growth. Consequently, you should consider including a reasonable percentage of growth-oriented investments in your retirement and other investment accounts, with the precise amount depending on your individual goals, risk tolerance and time horizon.

 

Look for income even while serving as caregiver. Of course, you may never become the primary caregiver for your elderly parents – but even if you do, it doesn’t necessarily follow that you must forego all earned income. If it’s possible, you could seek to go part-time at your current job, or request some type of telecommuting arrangement. And as long as you have some earned income, from somewhere, you can still contribute to an IRA.

 

Manage retirement plan withdrawals carefully. Once you’re retired, possibly to become a full-time caregiver, you can take penalty-free – though still taxable – withdrawals from your 401(k) as early as age 55, provided you meet certain conditions. Once you’re 59-1/2, you can take penalty-free withdrawals from a traditional IRA, though the money will be taxable. While you can withdraw contributions you made to a Roth IRA at any time, tax- and penalty-free, you’ll have to wait until 59-1/2 to take out your earnings free of taxes and penalties. And you’ll need to find a sustainable withdrawal rate so you can reduce the risk of depleting these accounts too early.

 

As a society, we are still working toward equality for all people – including economic equality. As a woman, however, you can’t afford to wait until that day arrives, so you need to be proactive in seeking and maintaining your financial security.

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The Right Insurance Can Meet Both Short- and Long-term Needs

If you’re going to achieve your important financial goals, you’ll need to build an appropriate investment portfolio. But that’s only part of the story – because you also need to protect what you have, what you earn and what you’d like to leave behind. That’s why it’s a good idea to become familiar with the various types of insurance and how they can address short- and long-term needs.

For starters, consider life insurance. You may have important long-term goals, such as leaving an inheritance for your family and providing resources for your favorite charities. You may be able to fulfill some of these through the death benefit on your policy.

 

You can also purchase life insurance to help fill the gap between the amounts you have saved and what your family would need if you died unexpectedly. Thus, insurance can pay for liabilities (such as a mortgage, car payments, student loans and other debts), education expenses (such as college for your children) and final expenses associated with your passing.

 

Next, consider disability insurance. If you were injured or became ill and couldn’t work for a while, the loss of income could be a big problem for your family members – in fact, it could disrupt their entire lifestyle. Even a short-term disability could prove worrisome, while a long-term disability could be catastrophic. Your employer might offer short-term disability insurance, and that could be enough – but do you really want to take that chance? To protect your income if you were out of work for an extended period, you might need to supplement your employer’s coverage with your own long-term disability policy. Long-term disability insurance, which generally kicks in after you’ve used up your short-term benefits, may pay you for a designated time period (perhaps two to five years) or until your reach a certain age, such as 65. Long-term disability insurance likely won’t replace your entire income, but it can go a long way toward helping you stay “above water” until you recover.

 

You may also want to think about long-term care insurance. Despite its name, a long-term care policy could meet either short- or long-term needs. On the short-term end, you might need the services of a home health care aide to assist you in your recovery from an injury such as a broken hip. On the other end of the long-term care scale, you might someday need an extensive stay in a nursing home, which can be extremely expensive and which isn’t typically covered by Medicare. But in either case, you might be able to benefit from a long-term care insurance policy, or possibly a long-term care rider attached to a life insurance policy. And the earlier you take action, the better, because long-term care insurance, in particular, generally becomes more expensive the older you get.

 

This list of insurance policies, and the needs they can help meet, is certainly not exhaustive, but it should give you an idea of just how important the right insurance coverage can be for you – at almost any stage of your life.

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Your Financial Advisor Can Do Some "Life Coaching"

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Life coaches – not surprisingly – strive to improve the quality of life of their clients. And financial professionals essentially embrace the same mission. So, if you decide to hire a financial advisor, you should expect to receive some “coaching” as you work toward all your important objectives, such as sending your kids to college, enjoying a comfortable retirement and leaving a legacy that can benefit the next generation.

 

What tips from life coaches might you also get from your financial advisor? Here are a few:

Create a plan. A life coach can help you create a plan for your future, taking into account your career aspirations, relationships, hobbies, charitable activities and so on. And a financial advisor will also take a “holistic” approach by looking at many elements – including your age, income, family responsibilities and desired retirement lifestyle – to create a long-term investment strategy. Of course, you may need to adjust this strategy in response to changes in your life, but it can still serve as an overall map on your journey toward your financial objectives.

 

Identify and prioritize goals. A life coach will help you identify and prioritize your life goals, whether they are personal or professional. And your financial advisor can help you do the same with your financial goals. For example, your goal of retiring comfortably at age 65 may take precedence over your wish to purchase a vacation home. As such, you will need to focus your efforts first on the retirement goal, and then, if it appears likely that you will meet that goal, you can devote the resources necessary for your vacation home by the mountains or the sea. You may even be willing to accept a lesser goal, such as renting, rather than owning, your vacation residence.

 

Move beyond your comfort zone. A trained and experienced life coach can help you recognize your perceived limitations – and move beyond them. For instance, if your new job requires that you make many presentations, but you are nervous about public speaking, your life coach may offer techniques to help you get past this fear – to move you out of your “comfort zone,” so to speak. This same scenario could play out in your interactions with your financial advisor. If you happen to be a cautious and risk-averse person by nature, you might be inclined to bring those same traits into the investment arena. But a competent financial advisor – one who truly has your best interests in mind – will likely warn you that you will have trouble achieving your financial objectives if you try to avoid all risk by sticking exclusively with so-called “safe” investments, which do not offer much growth potential. Instead, your advisor will help you incorporate your risk tolerance, along with your time horizon and your short- and long-term goals, to help shape an investment mix appropriate for you. Such a mix may well include those "safe” investments, but it would also contain a reasonable percentage of growth-oriented ones.

Whether it’s self-improvement or your financial future, you can benefit from good coaching – so take full advantage of it.

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Financial Gifts for Valentines...of All Ages

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Valentine’s Day is fast approaching. This year, consider going beyond the flowers and chocolates and think about providing financial-related gifts to your loved ones of all generations. 

Here are some gift possibilities to consider:  

For your spouse or partner – Your income – both today and in the future – may be essential to the ability of your spouse or partner to maintain his or her lifestyle and even to enjoy a comfortable retirement. Consequently, you need to protect that income and be prepared to replace it. So, why not use Valentine’s Day as an opportunity to review your disability and life insurance? Of course, you don’t have to evaluate your insurance needs and add new coverage all in one day, but the sooner you act, the more you can relax in the knowledge that you’ve helped give your spouse or partner a more secure future.  

For your children or grandchildren – If you want your children or grandchildren to go to college, or to receive some type of technical education that can help them launch a good career, you may want to provide some type of financial assistance. And one education-funding vehicle you might want to consider is a 529 college savings plan, which offers tax advantages and high contribution limits. Plus, it gives you, as owner, considerable flexibility – you can always change beneficiaries if the child or grandchild you had in mind decides not to go to college or a technical school. (Be aware, though, that a 529 plan can have financial aid implications, so, at some point, you will want to discuss this issue with a financial aid counselor.) 
Another financial “gift” you could give to your children is a bit more indirect, but possibly just as valuable, as a 529 plan – and that’s the gift of preserving your own financial independence throughout your life. If you were to someday need some type of long-term care, such as an extended nursing home stay or regular visits from a home health aide, you could find the costs extremely high. Medicare typically pays few of these costs, so you will likely need to come up with the funds on your own. You can go a long way toward protecting yourself from these expenses – and avoid having to burden your grown children – by purchasing long-term care insurance or some type of life insurance with a long-term care provision.  

For your parents – One of the best gifts you can give to elderly parents is to help make sure their estate plans are in order. This is never an easy topic to bring up, but it’s essential that you know what responsibilities you might have, such as assuming power of attorney, to ensure that your parents’ plans are carried out, and their interests protected, in the way they’d want. Toward this end, you will need to communicate regularly with your parents – and if they haven’t drawn up estate plans yet, you could arrange for them to meet with the legal, tax and financial professionals necessary to help create these plans. 

Just as the definition of “love” is broad enough to include all the people most important to you, so is the range of financial gifts you can give your loved ones. Start thinking about these gifts on Valentine’s Day – and beyond. 

 

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

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What Can Investors Learn From "Big Game" Teams?

To learn about on how Lisa can help you manage your finances click here!

 

In February, TV stations the world over will broadcast the most-watched U.S. football game of the year. But sports fans aren’t the only ones viewing this “big game,” held in Atlanta this year. The two teams competing are watched closely by the teams that didn’t qualify. That’s because these teams can learn a lot from the contenders. In fact, “big game” teams can teach some valuable lessons to many groups and individuals – including investors. 

What investment insights can you gain from observing these teams? Here are a few to consider:  

A good “offense” is important. “Big game” teams usually have the ability to score a lot of points. They can run the ball, pass the ball and move up the field quickly. As an investor, you also need to constantly seek gains – in other words, you need an “offense” in the form of an investment portfolio capable of producing long-term growth. Consequently, you will need a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based mutual funds, in your holdings. Yes, these types of investments carry risk, including the potential loss of principal. But you can help reduce your risk level by holding investments for the long term – giving them time to possibly overcome the short-term drops that will inevitably occur – and by diversifying your overall portfolio with other types of investments, such as bonds and government securities, that will likely not fluctuate in value as much as stocks.


A strong “defense” is essential. In addition to having good offenses, “big game” teams are also typically strong on defense. They may give up yardage, and going against a strong offense, they will also give up points, but they still often stop their opponents from making the big, game-breaking plays. As someone with financial goals, such as protecting your family’s lifestyle and helping send your children to college, you, too, have much to defend – and one of the best defensive moves you can make is to maintain adequate life insurance. Also, to protect your own financial independence – and to defend against the possibility of becoming a burden to your adult children – you may want to explore some type of long-term care insurance, which can help pay for the extraordinarily high costs of an extended nursing home stay.  

The ability to adjust a strategy is essential. If a “big game” team is trailing, it very well might decide to switch its game strategy – perhaps they tried to keep the ball on the ground but fell behind, requiring them to throw more passes to catch up. You also will need to evaluate your progress toward your goals to determine if you may need to adjust your strategy. To illustrate: If your current portfolio is not providing you with the returns you need to retire comfortably, you may well need to adjust your investment mix to provide more growth potential, but within the context of your risk tolerance and time horizon. 

The “big game” is the culmination of a season of hard work by two teams that have achieved the highest level of success. And by applying the lessons you’ve learned from these teams, you can help contribute to your own success. 

 

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

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Insurance Can Protect Your Aspirations

To learn about on how Lisa can help you manage your finances click here!

You probably already know that life insurance can protect your family if something were to happen to you. But you might not realize the many ways in which insurance can help you preserve your plans for the future – whether for yourself, the next generation, or those charitable groups you support. 

Specifically, life insurance can potentially help you address several areas, including the following:  

Help in covering final expenses – The proceeds of a life insurance policy can provide immediate funds at the time of your death to pay for your funeral costs, your debts and your final income taxes.  

Transfer wealth (with potential tax advantages) – Some wealth transfer vehicles carry significant tax consequences. But the proceeds from life insurance are typically free of income tax, so if your death benefit is $1 million, your heirs will receive the full $1 million. (Consult with your tax advisor about all potential tax consequences beneficiaries might face.)  

Provide charitable gifts – You can use life insurance in various ways to support charitable organizations. One option is to donate a policy you may no longer need. Either you or the charity would continue paying the premiums, but the charity would become both the owner and beneficiary of your policy. Alternatively, you could purchase a permanent life insurance policy and donate it to the charity, which could then use the policy’s cash value when you’re alive and receive the death benefit when you die.  

Help fund a revocable living trust – Depending on your situation, you might want to establish a revocable living trust as part of your estate plans. A revocable living trust helps you avoid the time-consuming, expensive and public process of probate. And, among other benefits, a living trust allows you to distribute your financial assets over time, and in amounts that you specify – which may be quite appealing, if, for example, you’d rather not give your children a large amount of money at once. Life insurance can help fund your living trust – you just need to name the trustee (which may well be yourself while you’re alive) as the owner and beneficiary of the policy. However, you will need to consult with your legal advisor before creating and funding a living trust.  

Help cover long-term care costs – You may never need any type of long-term care, but if you do, you’ll find it quite expensive. It now costs, on average, more than $100,000 per year for a private room in a nursing home, according to the 2018 Cost of Care Survey, produced by Genworth, an insurance company. Medicare typically pays little of these costs, so the burden will fall on you. To avoid using up your financial assets – or, even worse, having to rely on your adult children for help – you may want to purchase insurance. Some life insurance plans offer long-term care coverage, either through a special “rider” or by accelerating your death benefit, but you might also want to consider a traditional long-term care insurance policy. 

As you can see, one of the most flexible tools you have is life insurance. Start thinking soon about how you can put it to work.


Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.

 

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

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2019 Big Rapids High School basketball game recap

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