Fun in end-of-year planning

December 9, 2014 § Leave a comment

j0442965

It’s a good time to plan for end-of-year financial options. Having a bit of time, instead of waiting until next year, allows you to keep your eyes open for your personal possibilities. Please speak with your tax advisor when making some of these decisions.

Maximizing retirement – When was the last time you increased the contribution to your 401(k)? The maximum contribution you can make according to the IRS is $17,500. And if you are over age 50 you can add another $5,500 to that for a total if you are over 50 of $23,000. And that is before your employer’s contribution. If you are doing a small percentage and always meant to increase you amount, maybe now is a great time.

Required minimum distributions – If you are age 70.5 have you taken this year’s Required Minimum Contribution? Penalties for NOT taking these contributions are quite steep.  If you are required to take an RMD and fail to do so, ‘the amount not withdrawn is taxed at 50%,’ according to IRS.gov

Using flex accounts – If you have a flexible savings account at work and need to use it or lose it, now is the time to get the glasses or getting your teeth cleaned. Even though this time of year is busy, you’ll want to get this done in a way that works for your needs.

Charitable giving – The tax code is written in a way that your generosity is rewarded in a tax benefit to you. So GIVE. All year you have seen difficulties and noticed the organizations that have stood in the gap for those who suffer. Now is the time when you can include these good organizations in your holiday giving.

This is certainly not a complete list of things to keep in mind. But giving yourself time to consider your financial end-of-year options will allow a possibly more directed outcome. (CR10393)

 

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Retirement Plan BINGO

August 22, 2014 § Leave a comment

money grows

So many retirement plans! And when it’s not your area of expertise…yikes, it can be overwhelming. So what do all the letters and numbers mean? Let’s discuss!

Step ONE- Pre-tax contributions – Most retirement plans are funded with what are termed ‘pre-tax contribution.’ Taxes are NOT removed from that contribution now but will be owed later, when the money is removed from the tax-deferred protection of the particular account. So if you are twenty years old and begin to save, the money contributed to the account is pre-tax, and if you didn’t begin removing it until age seventy, for example, the money grows protected from tax, or tax-deferred, until you remove any or all of it. Each amount withdrawn prompt the taxes due.
First a caveat: all of the accounts mentioned below have additional benefits and restrictions that cannot be addressed in this short post. You should know that the information provided here is a very general overview of these plans and you should seek more detailed information from a financial advisor.

Account TYPES- Here are a few of the types of accounts frequently held.

403(b)– Used by public schools and some hospitals this is a pre-tax retirement account for eligible organizations with a non-profit tax status. The plan allows for interested employees to contribute some of their money and also allows for the employer to contribute.

Traditional 401(k)– is a pre-tax retirement plan for business and their employees. It allows eligible workers to contribute pre-tax money into a retirement savings account. It also permits a ‘profit-sharing’ contribution for the firm to contribute to your account. The money is tax-deferred while it remains in the account or another account allowed, such as a Rollover IRA and taxes are not due until money is removed.

 IRAs – Speaking of IRAs, there are many types. SIMPLE IRAs are retirement accounts for employers with less than one hundred employees. Traditional IRAs allow individuals to save pre-tax money on their own, or with an advisor. Rollover IRAs, which I mentioned, allow qualified monies to be rolled out while maintaining the tax-deferred status. These funds are most often rolled at separation of employment into a rollover IRA account.

But then there’s this.

Roths – One other type of IRA and retirement plan is the Roth IRA. THIS plan is different than the other plans mentioned as contributions are made with AFTER tax contributions. Distributions are tax free if taken after age 59 ½ and the Roth account has been open for at least five years.

As I mentioned earlier, there are many more details about the pros and cons of these accounts and for your particular situation you should speak to your financial advisor about the best plans for you. (CRCR10168)

Retirement By the Numbers

July 16, 2014 § Leave a comment

leaves-228111_1280

I find it helpful to speak to folks with experience when making decisions about my future, and I’m guessing you do, too.

So when we are considering retirement strategies, what decisions, say on taking Social Security, have others tried? Have they been happy with the results of those decisions or would have, in hindsight, done things differently?

I found a few interesting studies that asked some of those very questions and her are the findings.

How much do we need? This is one of the first questions to ask as you begin retirement timing. About 85% of what you are bringing in as a working person is the amount many experts say is what you’d do well with in retirement. Fidelity Investments has estimated, living until perhaps age 92, we should try to save 6 times our ending annual salary. So if you are earning $50,000 in your final working years, using this example, you might want to have saved $300,000.

The sobering fact is that according to a survey by Employee Benefit Research about 36% of folks have saved LESS than $10,000.

What about Social Security? According to a study by Nationwide Financial 38% of retirees regret having claimed their Social Security benefits early. An article in Investments News reports that retirees can claim Social Security benefits as early as 62, but their benefits are permanently reduced by 25% compared to waiting until full retirement age of 66 to begin payments. And those willing to wait even longer earn delayed retirement credits worth 8% per year for every years they postpone benefits up to age 70, increasing their benefits by an additional 32%. And that, my friends, is real money.

The moral of the story is that if you can afford to wait, if you can keep working, live more frugally, whatever it takes to stave off taking of benefits, might be best for your future.

So, at what age should you retire? Think this through with me. The longer you wait the better for your wallet. Delaying retirement by even just a few years can increase your annual Social Security benefit, may allow your savings to grow for a few additional years, may allow you to really pay off troublesome debt.

On the other hand, healthcare costs are a concern if you retire before age 65, before you are eligible for Medicare.

What’s the answer? There is no single answer, no cookie cutter, which addresses each person’s individual concerns. General rules of thumb: save as much as you can. Pay off debt. Wait to retire so you can maximize benefits. (CR10139)

Goint to the Chapel: The Finances of Togetherness

June 12, 2014 § Leave a comment

Love and money

I appreciate a good love story. But I hate if the ending is sad, if the joy and determination at first is lost.

With June the most popular month for weddings, this is a good time of year to have a little heart-to-heart about the finances of togetherness. You may not be getting married or are just taking your relationship ‘to the next level,’ let’s see if we can your future together rosy and bright.

We’re going to jump right into the deep end.

The legalities– Folks in love don’t always want to discuss boundaries. But Robert Frost’s famous line, ‘Good fences make good neighbors,’ is oft repeated because of its immense truth. So if you are not getting married you may want to invest in a domestic partnership agreement. Not romantic? Being financially ruined is also not romantic.

Day-to-day expenses – There are several ways to manage expenses. I will list three here and their pros and cons. 1.) Keep bank accounts and finances entirely separate- which is hard when it comes to food and cable or encouraging feelings of togetherness. I have seen couples do this and it has emotional consequences for them. It leaves one, in my experience, feeling as if the relationship is more like a roommate arrangement. 2.) Put all earnings into one joint pot or account- which is hard if there is disagreement on hobbies or spending- like shoe shopping or things any other items or interest on which you may have strong disagreements. 3.) Another method is the ‘pick your bill’ or the percentage-of-income-to-percentage-of-expenses method- which is hard for saving jointly. Like I said, each method has pros – which I didn’t mention- and cons, and there may be times in your lives together when you use particular methods as life evolves in your relationship or jobs change.

Big purchases – Assuming you have a legal agreement, buying a car or expensive item together is easy as distributing proceeds in the event of a breakup is already spelled out. But titling expensive purchases, like property, is very important without a legal agreement. So please consult an attorney or legal advisor in such cases.

Red flags– You may want to NOT join your finances together if your intended partner owes money and doesn’t pay bills, if they spend beyond their means regularly, if you are the source of money because getting work is ‘hard.’ These and other red flags should be a wake-up call that the person you love may not be the adult of your dreams. You want a real, responsible – and fun- adult with whom you can share financial goals.

I’m a planner. I kind of have a compulsion to think of the worst case scenario. When you’re in love…you don’t. But bad things happen to people in wonderful, caring people, people in love. We never want your heart broken. But since in life there is heartache, we certainly don’t want to add financial ruination as well.

Plan so you can be safe. Be in love, but be safe. That’s how smart adults do things. (Information provided should not be construed as legal or tax advice; you should speak with an attorney or tax advisor.CR10057)

 

Insurance: Not Thrilling but Important.

May 15, 2014 § Leave a comment

Kids at the shore

We generally know that life insurance is important, but it can seem confusing. Not to mention boring. Not boring to me, of course. But I can see why in your busy life and with your schedule, this might be a topic that you would rather deal with at another time. But when, exactly, will you figure this out and take the time to at least get an overview of this exciting subject? After all, this is pretty important topic for your loved ones, especially the little ones in your life. Maybe you could grab an adult beverage and pull up a chair. Let’s chat.

Who needs it? – Insurance. Who needs it? One web site answered the question with more questions. If someone depends on you financially, that may be a good indication of a need for life insurance. Do you supply income to anyone? Do you help with the expenses of a family member? Do you own a property in which dependents live? Don’t take for granted all the myriad ways you help people. Folks need you, both because you love them and also possibly because your contributions have a financial impact on their lives. How would their situation change if something were to happen to you, my friend?

You can see that these important questions may open a bigger conversation. Do not be overwhelmed. Be aware that in seeing this larger picture this may be where insurance may be beneficial to you.

How much? – Suffering the loss of a loved one is a terrible tragedy. It takes years to recover and we are always changed by the loss.

However, insurance at least allows you to LIVE, with a roof over your head, in the same school, participating in the same activities, even after that terrible separation. Being able to continue to life in the same surroundings and able to have the freedom to spend more time with the kids and not worry about missing work, these are the reasons for life insurance. To help you keep your lifestyle when someone you love is gone.

No amount of money makes up for their loss. But what if, because of their loss, you also lost your home, the kids had to change schools and you had to take another job? Having money troubles after such a devastating loss can be terribly hard.

So how much do you need? What lifestyle do you want to maintain? Few of us can afford every possible contingency. But having some idea of what items are essential to help the family be stable and possibly to be cozy are figures that can be estimated. And you need to do this to plan for those people who depend upon you, loved adult. They need you to be pragmatic and do what you can afford to do to take care of them – in case.

What kind? – There are several types of life insurance. Term insurance is for a period of time: ten, twenty or thirty years are common periods. Term insurance is often less expensive than other types as it is for a specific period of time. Two other types of insurance fall into the category of ‘permanent’ life insurance. Those kinds are whole life and universal life. These types of policies build cash value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid. Lots of details about how these vary but we don’t have time to discuss them here. You should speak with an insurance professional regarding your individual situation.

Now what? – Talk to an insurance agent. Know that all insurance agents need to be licensed by the state. And whether you use a local agent or a person who you’ve never met via an online option or phone, the same rules apply to them. Since we are all licensed in the same way the difference, is service. If you work with a local insurance agent they live in the community, have their kids in the same school and may understand your family, and their needs, more personally.

If you suspect you need insurance, get a quote. There is no obligation and getting started on this journey could really help your family. Drink up! (Additional disclosure: Health and other non-variable insurance products are not offered through Wall Street Financial Group, Inc. CR10001)

Seven Possible Sources of Retirement Income

April 16, 2014 § Leave a comment

money grows

Money in retirement. It is the culmination of our efforts, the harvest to enjoy in later years. When we are relaxed on an exotic beach, or chasing the grandkids, our retirement income, the careful planning, allows us to rest easy knowing our futures are bright and secure.

Though for many Social Security is the central source of retirement income, there are other possible places from which some income for your future might be obtained. The goal in retirement is to fashion together income streams that all together provide you with the level of income you may need to cover expenses and fun. This stream added to that income stream, plus this one equals your total bucket of money for each period.

You might use some of these ideas to provide possible supplemental income for you.

Rent – Do you own an apartment, duplex or business property? The rent from that asset may provide you with money to offset your living expenses. You might budget this money for an expense that is similar in value, such as taxes, winter heating costs or another monthly bill.

Annuities – Annuities can provide lifetime income. Once again this stream needn’t be big so long as it provides another source for covering your expenses. Even fifty dollars a month added to your income is a blessing.

Inheritance – Millions of dollars change hands every year through inheritances and yet many have not properly prepared for the transition. Creating the retirement income you are looking for may be helped with funds gained through the generosity of those who love you.

Savings accounts – Savings accounts and Certificates of Deposit (CDs) make up a larger portion of retirement income than the previous income sources mentioned above. Having a plan for how the money may be allocated, to what bill or pleasure, may help in making sure all of your needs are covered.

401k – Retirement plans accumulated from your tax-deferred plans through work, or in Individual Retirement Accounts (IRAs), for many of us generally make a significant source of funds for retirement. If you have several years until you plan to retire, renew your saving efforts by either beginning an account or adding to your established retirement saving accounts.

Part-time work – About twenty percent of retirees find that part-time work is a great source of additional income. If jobs are available and you are healthy enough for work, you may enjoy not only the money but the social interaction.

Pensions – Defined pensions have been discontinued at many companies because of their expense to the firms. The Bureau of Labor Statistics reported that about twenty-two percent of full-time private industry workers recently got a defined pension benefit. Once again, no matter the amount, this can work with other sources of income to provide you with additional financial stability.

The goal in having this discussion is to help you know that many of the people who I work with use every possible source of income to piece together their retirement income. The transition into retirement, receiving only a single adequate paycheck (or two if it is a two-income family) to multiple checks from various income sources, can be a confusing transition. But once you get everything set up, and have a plan for each piece of money, things will be good. (CR9920)

Your business

March 19, 2014 § Leave a comment

balloons let loose in a blue sky

Many of my clients and friends are business owners and I have a cozy place in my heart for those willing to take the risk and go forward with their vision to change the world, and their own futures, by stepping out in business. In fact, according to the Small Business Administration, 99.7 percent of US firms are small ones and they are responsible for 64 percent of new jobs in our country. In times of changing employment markets, many folks begin their own business and make their dreams a reality.

So what do you need to know to start YOUR business? Here are some tips.

Your plan – A business plan may seem like a big hurdle to begin your start-up, but it is an essential tool for you to evaluate your competition, clearly understand YOUR value proposition and what sets you part from the others in the competitive market, and makes you face the prospect of the real success or failure of the firm. In a business plan is a SWOT analysis, which stands for: Strengths, what are the strengths of your firm? Weaknesses? What are firm’s weaknesses? Opportunities? What markets are you hoping to capture that have not yet been absorbed by competitors? And what are the threats that you will need to overcome?

A business plan also includes your marketing plan. Who is your target market? Not everybody. Everyone is really not your target market. You don’t want folks who can’t [pay for your services, or folks who think they can do a better job. You want folks who appreciate you and think you are professional and capable and who have the funds to support you in business. So you really have to be critical in your marketing plan. What are the tactics to put your plan in place? Are you going to advertise, do social media? It will become easier when you hone in on your target market.

Choose a location– This is a more critical decision than you may have realized: where are you going to operate your business? Can you operate at home? Do you have the space? What will clients think with a home occupation? Do you have parking? Is working from your residential location a permitted use for the zoning in your town?

Is your location near the customers? Is it visible? Can you put adequate signage on the exterior space?

If you can meet clients elsewhere or you are conducting business online, the location may not be as critical. But for most businesses, where you do locate your business may have significant ramifications.

Funding – Where’s the money coming from to start this enterprise? Do you need to buy equipment or inventory? What money will you use to pay the bills? Is it a credit card? Savings? A business loan?

Business type – What will be the legal type of business for your start-up? LLC? DBA? An S-corporation? A C-corporation? Talk to a tax advisor or an attorney to figure out the best way to help protect yourself from liability and for taxes.

Business name – Your business name is really important. It speaks to your credibility. It addresses what you do so new folks don’t need to guess. Make sure as you are choosing a name, that a web site domain name is also available. You will want to check to make sure that you are not infringing on any registered trademarks when you pick a name.  You do the best you can. There are experts in marketing who excel at helping you come up with a great business name. You may want to consult an expert.

Licenses and permits – I mentioned above that you may not be able to run an enterprise like yours in your town or even in the residential neighborhood in which you live. In addition to town ordinances and zoning  you need to consider any permits required because of the type of business you’re starting. For those of you in Maine, the State of Maine has helpful information on their web site:

http://www.maine.gov/portal/business/starting.html

Tax ID – Paying taxes is part of owning a business. Your business will need a tax ID. The IRS has information on their web site to help you understand what a tax ID is and how to file for your company’s number:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Starting-a-Business

Rules for employers – As your business grows and you need to hire, there are other considerations. You’ve worked hard to set your firm apart from the competition and you will want to keep the vision and the culture of your business. You will want to have folks dress a certain way, greet customers a certain way, answer the phone and take orders in a particular way. You will want to excel in great service, in personal care, in doing the best job so folks come back time after time. How are you going to pass that information on to new hires?

This is just some of the information needed to run a great business. Lots of things to think through even before you open your doors to have the best shot at success. Having a excellent skill or talent isn’t all you’ll need. But getting some of these things done well will save you a lot of on-the-job education in your business start-up. (CR9882)

 

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