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Financial Planning

6 out of 10 adults don’t have a will. Do you?

We’re all mortal. We know that we’ll have to face that fact… someday…

But planning for our life’s end is difficult to grapple with. It’s why so many of us haven’t taken the time to craft a will or trust.

(One fine point… as folks age, they tend to be more likely to have a will… 81% of individuals 72 or older tend to have some form of estate planning in place.)

There’s an issue with this. Putting off a will puts loved ones at risk, especially if they have children that will need care. With as many as 78% of individuals with young kids not having some form of estate planning in place, this is a frightening proposition.

Interestingly, individuals appear to be a bit more proactive about establishing power of attorney for health care decisions. (This is important if you become incapacitated and need someone to make decisions on your behalf.)

So what’s the biggest reason individuals haven’t created a will? According to surveys, it is simply because they “haven’t gotten around to it”. It seems that while folks recognize it is important to have a will, they are resistant to take action. (The same reasoning applies to people putting off establishing a healthcare power of attorney.)

So if you’re like most Americans you don’t have a will… But you can do something about it. There are many options including getting professional advice or using software and services to help you create one on your own. (Nolo.com is a popular resource for “do it yourself” legal solutions.) One thing… be careful with creating your own will. If you fear family members may challenge your will, having one professionally crafted is a good choice.

And while you are thinking about how to protect others with a will, you may also want to consider life insurance. Be sure to talk with you insurance professional. They can offer you great advice… and they’ll show you how flexible life insurance can be.

What’s a Safe Investment That Protects Against Inflation?

It appears inflation may be on the rise. Certainly the Federal Open Market Committee seems to think so. This is why it continues to incrementally increase interest rates. Further evidence includes an increase in the Consumer Price Index, rising wages, and a tightening labor market.

So what sort of investments might one consider with rising inflation and a stock market at (or near) all-time highs? Bonds… specifically Treasure Inflation-Protected Securities (also known as TIPS).

Most bonds pay out a set interest rate. TIPS on the other hand have some of their repayments linked to the government’s Consumer Price Index. So as inflation rises, you can earn more.

TIPS also behave differently than most bonds from a tax point of view. This means it is important that you understand how they may impact your tax situation.

TIPS are also more volatile than “normal” bonds, so they should be a part of a long-term strategy. Otherwise fluctuations over shorter periods of time may be nerve-racking.

A different choice would be to consider I Bonds. (Also known as Series I Savings Bonds.) These are offered by the U.S. Treasure and are connected to rising costs of living. I Bonds protect against inflation over time and are guaranteed to not lose value during deflationary periods.

You can learn more about I Bonds by clicking here.

Of course, it’s best to have a conversation with your financial adviser to determine the appropriateness of each option based on your current financial situation and your long term goals.

Watch Out For These 5 Tax Traps

Many folks are already working to file their taxes… especially if they have refunds due. But nearly 60% of taxpayers worry quite a bit about their taxes.

  • Worry about what they might owe the IRS.
  • Worry about completing the paperwork properly.
  • Worry about a potential IRS audit.

So, we’ve put together these 5 tips to help calm fears and make certain your taxes are as stress-free as possible.
Mistake #1 – Skip Filing Taxes


Many individuals mistakenly think they don’t need to file if they don’t have a paycheck. This is especially true for seniors. Small business owners may make this mistake too – particularly if they haven’t been making estimated tax payments. Regardless, it is never a good idea to skip filing. Failure to file penalties can be excessive – 5% of overdue taxes for each month the return is late.
If you have a reason why you can’t file on time, simply file for an automatic six-month extension for the IRS by filing Form 4868. In many cases, this will protect you from getting hit with late-filing fees.


And it is important to note that filing for an extension doesn’t give you more time to pay your taxes. If you owe, estimate that amount and be sure it is paid by the filing due date.
Mistake #2 – Social Security
Many seniors assume their Social Security benefits aren’t taxable. That isn’t always true. In certain situations Social Security earnings can be taxed if you are married and your income is above $44,000. They can also be taxed if you are single and your earnings are greater than $34,000.
As much as 85% of your Social Security income can be taxed depending on how far above the thresholds your actual income is.
This is where talking with a professional is important. For example, some believe if income is from tax-exempt interest like from municipal bonds, they don’t have to worry about how it influences the taxation of Social Security benefits. This would be a mistake.
Mistake #3 –  Required Minimum Distributions
If you have money in an IRA or 401(k), you need to begin taking required minimum distributions (RMDs) after you turn age 70 1/2. If you fail to do so, you risk a 50% penalty on what you should have withdrawn.
Financial organizations that administrate these plans have a requirement to advise you on your RMD. However, the responsibility to take the distribution resides with you.
If you’ve discovered you’ve made a mistake in taking your distribution, you need to correct that right away. Showing that you recognize the error and have taken action to correct it will help with the potential of having the IRS waive fees.
Also, if you don’t plan your required minimum distributions carefully, you could end up bumping yourself into a higher tax bracket. Again, this is where talking with a qualified financial advisor is critical to find the most tax-advantaged ways of dealing with RMDs.

  1. Some Bonds Get Taxed

Bonds are a popular option for folks in or nearing retirement. But it’s a mistake to believe that all bonds are tax-free. Some local bonds carry tax risk.
For example, some municipalities issue bonds for constructing things like sports arenas. These are called “private activity bonds”. If you face the alternative minimum tax or AMT, the interest from these types of bonds must be included in AMT calculations.
As a result, you could face a 28% federal income tax on that bond income.


The AMT was created years ago to prevent abuse from wealthy individuals claiming too many deductions. However, the tax itself hasn’t been indexed to inflation. That means that many middle-income taxpayers are now trapped paying AMT… so be very careful about this.


  1. Gifts


It’s popular for folks in retirement to distribute assets as gifts to their children and grandchildren. The thinking is this helps to minimize the size of the estate and potential probate taxes. Given that folks with assets of more than $5.45 million face Federal estate taxes a high as 40% it’s understandable why people want to avoid this.
You can give gifts up to certain thresholds after which if you give away more than the threshold you have to report the gift to the IRS.
Many people fail to make these filings because they misunderstand federal rules governing estates and gifts. It’s wise to talk with someone that knows about taxation to make sure you have a clear strategy for wealth distribution from your estate while you are still alive.

Best of 2016: Are You Keeping These 2016 Money Resolutions?

We’re a full month into the New Year and many of us are already losing interest in the goals we set 30 days ago. Skipping the occasional yoga class or spending an afternoon or two binge watching Netflix is unlikely to really hurt you in the long run. However, ditching the financial promises you made to yourself as 2015 became 2016 just might. Whether you’re still going strong or need to revive your faltering commitment, these could be the most important resolutions to try to keep this year.

Paying Off Your Debt

Many of us have been paying historically low interest rates on our mortgages, credit cards and other debts for the past several years. However, the Federal Reserve plans to raise the Fed Funds Rate, a benchmark rate many lenders use to determine the interest charged on their products, multiple times this year. When they do so, the annual percentage rate (APR) on any variable rate credit cards will also rise. So will the interest rate on adjustable rate mortgage loans.

In short, many of your debts may suddenly become more expensive—so it’s important to get to work paying them down. If you’re dealing with multiples, start making extra payments towards the one with the highest interest rate, then move on to the next.

Building an Emergency Fund

You wouldn’t get on a ship that wasn’t equipped with life boats, right? Nor should you sail through life without a life boat of your own—in the form of an emergency fund. Experts recommend saving enough to cover a minimum of three months of expenses, though six months-worth is even better. If you’re currently without enough disposable income to enable you to sock some away, look for areas in your budget where you can cut back and put those liberated funds into an easily accessed savings or money market account.

Save More for Retirement

According to the Employment Benefit Research Institute’s 2015 Retirement Confidence Survey, only 22 percent of American workers are “very confident” in having enough money for a comfortable requirement. While 36 percent are “somewhat confident,” 24 percent are “not at all confident” in the same. Experts recommend putting at least 10 percent of your annual income into retirement accounts each year—if you can. If that’s not possible right now, start with a smaller percentage and aim for small increases whenever you can.

Review Your Investment Strategy

Arrange a time to meet with your financial advisor and take stock of your investments. Discuss whether they are still in alignment with your risk tolerance and goals. Reallocate your assets as necessary to maintain a comfortable level of diversity. While you’re at it, consider any life changes made during the past year—such as marriage, divorce or the birth of a child—and modify your plan beneficiaries as well.

Whether you’re tackling one or all of these resolutions this year, we’re here to help you stay on track. Please don’t hesitate to give us a call for financial planning insight or to schedule a review of your current retirement investment portfolio or other products.

Comprehending The Benefits Of 529 College Savings Plans

If you have one or more kids, paying for college has probably crossed your mind at least once. One of the most popular options for saving for college is via a 529 College Savings Plan. Chances are, you are familiar with the plan… you’ve probably heard about it or read about it before.

But you may not realize how much of a tax benefit a 529 plan offers so hopefully this information will help…

The most obvious tax benefit is with state income taxes. For example, let’s say you start contributing $100 per month to a 529 plan for two children. Depending on where you live and your income, that can create tax savings from $100 to $200+.

But the real strength of a 529 plan is its ability to generate tax-deferred growth & tax-free withdrawals when used for approved purposes. Some 529 plans offer guaranteed returns while others behave more like mutual funds. Regardless, as you add funds and they accrue interest, that accrual occurs without being negatively impacted by taxes. And as long as funds are for defined higher education costs, the withdrawals aren’t subject to state for federal income tax.

Of course, non-qualified withdrawals are subject to federal taxes at your regular tax rate and you’ll pay an extra 10% penalty on what you withdraw. (There are some complex rules about how penalties are calculated so it is best to talk with your financial advisor to uncover the specifics for your situation.)

The key value of a 529 plan is to help with long-term planning of how to help pay for college. The trick is to start saving as soon as possible so the balance can grow… have a newborn? It’s time to start saving for college! Those relatively small amounts you save each month combined with the power of interest can yield a healthy sum by the time kids are ready to head off to higher education.

Some important notes:

  • You can participate in almost any state’s 529 plan regardless of where you live… take your time to find a 529 plan that offers the greatest benefit for your situation.
  • You can leverage 529 savings to pay for post-secondary education including community college, trade schools, study abroad programs, and of course traditional four-year colleges & universities. You do not have to apply funds toward colleges in the state the plan originates from.

Our best advice is to talk with your financial advisor here to learn about how 529 plans can benefit your specific situation and to explore the best options for you. They’ll offer guidance on the pros & cons of 529 plans for your situation as well as possible alternatives including life insurance as a savings alternative.

Though Not Advised, You Can Tap Retirement Cash Early

Though Not Advised, You Can Tap Retirement Cash Early

You know that the earlier you begin saving for retirement, the better prepared you’ll be financially when it’s time to collect your final paycheck (and the sooner you can comfortably do so). However, you may still be reluctant sock a significant percentage of your income away in retirement accounts and other investments if you’re worried about potentially needing that cash in the near future. Fortunately, there is a solution for your conundrum. Whether you find yourself facing an unexpected medical expense, need to finance a child’s education, decide to start your own business, or have to find cash to facilitate a home purchase, there are ways to tap into your retirement savings early—and sometimes without penalty.

Withdrawals for Emergency Needs

Even a sizeable emergency fund may not be enough to cover all of life’s hardships—especially if they’re accompanied by a job loss and lengthy period of unemployment. Unfortunately, while you can make a withdrawal from a 401(k) or IRA at any age, you’re going to pay a 10 percent penalty tax (in addition to any other taxes you owe) if you’re under the age of 59.5.

There are a couple exceptions. If you’re laid off or quit your job after the age of 55, you can take money out of a 401(k) penalty free. And depending on your employer and 401(k) plan, you may be able to take a five-year loan from your 401(k) regardless of your age. If you have a Roth IRA, you can take out your past contributions (though none of your earnings) at any time without paying the penalty.

Withdrawals for Medical Expenses

If you’re facing a hardship due to an unexpected medical expense, you may have additional options. Unemployed professionals may qualify for penalty-free withdrawals from their IRAs to pay for medical insurance. Some non-reimbursed medical expenses may also be paid with penalty-free withdrawals. If you’re permanently and totally disabled, you can make withdrawals from retirement accounts without penalty.

Withdrawals for Home Purchases

First-time homebuyers can withdraw up to $10,000 from their IRA penalty-free for their home purchase. Anyone who hasn’t owned a home in the past two years is also eligible for this withdrawal.

Withdrawals for Education

You may be able to withdraw funds from your IRA penalty-free to pay higher education expenses for yourself, a spouse or a child. If you have a 401(k) and can demonstrate hardship, you may be able to withdraw funds to pay for tuition, books and fees. However, you’ll still pay the 10 percent penalty and any other taxes you owe.

Keep in mind, when you make early withdrawals from a retirement account for any reason—and with or without a penalty—you’re losing the opportunity for those funds to grow. Discuss your options with your financial planner or investment advisor before tapping into your accounts. He/she may have alternative suggestions that will better allow you to maintain your progress towards a comfortable retirement.

Essential Benefits for a Comfortable Retirement

Essential Benefits for a Comfortable Retirement

When most people start planning for retirement, they spend a lot of their time trying to calculate how long they’re likely to live, how much money they’ll need to save to support themselves between their final paycheck and their final breath, and what that translates into as far as monthly savings needs. They spend far less time thinking about the various benefits they can use to generate that income—including the following:

  • Social Security is the foundation of many retirees’ income during their golden years. In order to maximize your Social Security benefit, you’ll need to work for at least 35 years, wait until full retirement age to quit working, and talk to a financial planner about further delaying your benefit claim.
  • Medicare will help you keep healthcare expenses from eating away at your post-retirement budget. You can sign up for Medicare three months before you turn 65. If you wait until later, you may find yourself paying higher premiums, so it’s a good idea to secure this benefit as soon as you are eligible.
  • 401(k) plans are sponsored by employers. If you have access to one, the company you work for may match the contributions you make each year. You won’t pay taxes on your savings until you withdraw them, which can lower your current tax burden. Should you eventually change jobs, you can move your savings into your new employer’s 401(k), maintain your old 401(k) or roll it over into an IRA—all without paying income tax or early withdrawal penalties.
  • IRAs—or individual retirement accounts—are similar to 401(k) plans but are not sponsored by employers. They are funded with pre-tax dollars and are a great way to save additional funds towards retirement once you’ve worked up to maxing out your 401(k) contributions each year.
  • Roth IRAs are funded with post-tax dollars. However, future withdrawals are tax free. You’ll want to talk to your financial advisor about whether a traditional IRA or Roth IRA is the right choice for you. If you’re currently in a lower tax bracket and expect to be in a higher one after retirement, a Roth could very well be your best option.
  • Cash savings accounts are also vital sources of money in retirement. If you need to deal with an emergency expense, you can make a withdrawal from a savings account without incurring the taxes and penalties you might have to pay if you access your retirement account too early.
  • Part-time employment is a viable way for many retirees to supplement their income. However, before you take on any paid job, it’s a good idea to talk to your financial planner about how your earnings may impact your other benefits such as Social Security.

Have You Included These Costs in Your Retirement Budget?

Have You Included These Costs in Your Retirement Budget?

When you’re planning for retirement, it’s easy to get caught up in saving for all the fun things—like travel and spending time with family—that you have to look forward to. Unfortunately, this distraction can lead to forgetting other essential expenses that could end up taking a big bite of your retirement budget. Whether you’ve created your own retirement plan or are working with a professional, make sure you’ve accounted for these costs.

Housing and Utilities – Even if you pay off your mortgage, you still need to budget for property taxes, insurance and maintenance as well as heating, cooling, water, gas, trash pickup and lawn work. These bills can really add up, so you may want to consider downsizing into a smaller property or looking into a retirement community that will cover some of these expenses for you.

Medicare Premiums – While you may not have to pay a premium for Medicare Part A, which covers hospitalization and skilled nursing facility care, Medicare Part B, which covers preventative and medically necessary services such as lab tests, charges a standard premium of $121.80 this year—and it’s likely to go up in the future. You’ll also have to pay a premium for a Medicare Part D prescription drug plan and any Medigap plan—to cover out-of-pocket costs—that you choose to enroll in.

Other Healthcare Expenses – The deducible for Medicare Part B is $166 in 2016. As with the premium, it’s possible that it may increase in the future. Regardless, after meeting your deductible, you’ll still be required to pay 20 percent of the Medicare-approved amount for most medical services unless you purchase a Medigap plan or other insurance plan to supplement your Medicare coverage. While some preventative services are covered without out-of-pocket costs, things like eyeglasses and hearing aids generally aren’t covered at all.

Taxes – Depending on the vehicles you’ve used to stash away your retirement savings, you may need to pay income tax on your withdrawals. A portion of your Social Security benefit could also be taxable if your retirement income is above a certain threshold. You’ll need to figure these expenses into your retirement budget, though consulting with a financial planner may enable you to make more strategic withdrawals from your accounts, thereby lowering your tax burden.

Emergencies – Busted water heaters, worn out car engines and sick pets don’t go cease to exist when you retire. You’ll still need an emergency fund to deal with unexpected expenses if you want to avoid spending your retirement savings too quickly.

Whether you’re 25 or 65, a financial planner can help you prepare for—and enjoy—a better retirement. If you’d like to discuss your current retirement plan or have other questions, please don’t hesitate to give us a call.

Four Ways to Catch Up on Retirement Savings

Avoid These Top Three Mistakes When Planning Your Retirement

My how time flies. It feels like only last week you were graduating from high school. Yesterday you were starting your first career. Now you’ve arrived at middle age, and retirement will be here in the blink of an eye. Whether or not that thought causes feelings of elation or panic has a lot to do with your current retirement savings.

According to a recent survey by GoBankingRates, a personal finance and consumer banking website, 33 percent of Americans haven’t saved a dime for retirement. Twenty-three percent have less than $10,000 saved. The remainder have saved a bit more, but another survey—this one by Fidelity—found that only 45 percent have enough saved to cover essential expenses during their golden years.

Fortunately, there are methods you can employ to help you catch up retirement savings—whether you’re in your 30s, 40s or beyond.

  1. Get rid of debt.

The interest rate on revolving credit card debt can quickly eat away at the cash you have on hand to put towards your retirement savings. Pay down your credit card balances as quickly as possible, then sock those monthly payments away in an investment account.

Paying off student loans and your mortgage may also be advisable—but that depends on your personal financial situation. Talk to your financial advisor about the best way to tackle your debts and free up more of your income for retirement investments.

  1. Max out your retirement account contributions.

It may take you awhile to free up enough income to reach the maximum contribution limits set by the Internal Revenue Service, but depositing as much as you can into a retirement account every year is essential if you want to catch up on your savings. In 2016, the 401(k) contribution limit is $18,000 for Americans under the age of 50. However, if you’re 50 or older, the maximum increases to $24,000. This year’s IRA caps are $5,500 for those under 50 and $6,500 for those 50 and older.

  1. Make a few lifestyle changes.

Are there things you can easily go without today in order to buy yourself a more comfortable future? If so, consider saying goodbye to those extras and putting the money you spend on them towards your retirement savings instead. Most of us have plenty of places we can reasonably cut back, from Starbucks lattes and dinner-and-movie date nights to cable channels we never watch and gym memberships we rarely use. In addition to trimming your spending, try to increase your earnings (perhaps with a second job or hobby that can generate income) and put that money into savings as well.

  1. Downsize your home.

A large home can be a major drain on your wallet. Not only do they generally come with larger mortgage, insurance and property tax payments, but they also cost more to heat, cool and illuminate. Whether you own your home outright or are still paying off a loan, you might want to consider downsizing. You can put any profit from the sale into retirement savings along with the monthly difference in your utility bills. To save even more, explore relocation to a city or state with a lower overall cost of living.

Are you worried that you won’t have enough money to retire some day? We can help. Give us a call today to review your current financial situation and get started making a plan that will have you where you need to be by the time you’re ready to retire.

Three Things to do Before Paying Off Student Loans

Your Three Biggest Social Security Questions Answered

If you’re still making payments to an education loan lender every month, you’re not alone. According to a study by NerdWallet, an online personal finance company, the average U.S. household has $130,922 in debt–$48,172 of which is attributable to student loans. It’s a hefty burden to carry, and it’s smart to chip away at it by making more than the minimum payment whenever you can. However, before you dedicate all of your disposable income to speeding up your education loan repayment, make sure you’ve done these three things.

  1. Set aside savings for emergencies. Commonly known as an emergency fund, this stockpile of savings will keep you afloat should you ever fall upon hard times as the result of a layoff, illness or injury, or unexpected home or automobile repair. Many experts recommend saving at least six months’ worth of living expenses—including mortgage or rent, credit card and loan payments, insurance premiums, food and other household necessities.

    The caveat would be if you have private student loans with prohibitively high interest rates. In that case, it might be wiser to throw at least some of your extra money towards the balances. Talk to your financial advisor about your situation.

  2. Reduce your credit card debt. Remember that NerdWallet study we mentioned earlier? Well it found that the average American household has $15,762 in credit card debt. They’re also spending more than $2,500 on credit card interest each year. With the average APR on credit cards at 17 percent, it’s easy to see how this is possible.

    Federal student loans in 2016 usually require between 4 percent and 7 percent interest. Though the interest on private loans is generally higher, if they’re lower than the rate you’re paying on your credit card debt, it makes sense to postpone repayment until you’ve tackled those balances. Ask your financial advisor about the best strategy for doing this.

  3. Don’t neglect your retirement fund. You’ve saved for future emergencies and have paid off all your credit card balances. Now it’s time to put everything you have towards those burdensome student loans, right? Not so fast. Experts advise taking a look at your retirement savings first. If you haven’t saved enough—or anything at all—it’s important to focus on remedying that situation before attempting to pay off your student loans.

    One recent survey found 56 percent of Americans have saved less than $10,000 for retirement. One in three have failed to save a single dollar in a retirement account. Talk to your financial advisor about creating a retirement savings plan or maximizing your contributions. Strategies will vary based on your current savings, current and future earnings, age, retirement goals and risk tolerance.

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